Tag Archives: borrowing

Student Loan Interest Rates To Fall


*Update 27/4/09* Due to the rapidly changing economic climate, this post is a little outdated. I recommend reading my latest post on the ‘current situation’

A bit of positive news after last years shocking interest rate rise. Student loans may see the rate fall from currently 4.8% to 3.8%. Although not confirmed yet, it looks like it will fall. This is most likely to change in September.

But how is the rate calculated? Well the Government’s aim is to set the rate so it mirrors the rate of inflation. Therefore the money you borrow remains the same value. Or at least that’s the plan. The problem, how do you calculate the rate of inflation? The two current methods are Retail Price Index (RPI) and Consumer Price Index (CPI). Before 2003 the Government’s rate of inflation was set by the RPI method, without going into the finer detail this gave the higher rate of interest. But since 2003, The Government has been using CPI as the indicator for rate of inflation. Yet they are still using RPI still to calculate student loan interest. The difference is disgusting.

What’s worse RPI tends to fluctuate more. For the year 06/07 the rate was 2.4% but this year it is 4.8%. Yep doubled. Continue reading Student Loan Interest Rates To Fall