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  • MexicanCCPBot
    link
    61 year ago

    with the interest set at inflation

    This is particularly evil. I know you’re talking about it being a thing of the past, but for anyone who is ever offered this kind of scheme now or in the future, I can say from personal experience: avoid it like the plague. Please, please, PLEASE, do not get a loan with interests set at inflation. Do the math, it’s designed to be unpayable. You could end up paying several times your original loan and still not be done with interests. It’s pure evil.

    • @redtea
      link
      51 year ago

      You’re right, of course.

      This was introduced by Tony Blair’s government. There was talk of introducing a ‘graduate tax’, which was widely reviled. Blair, Brown, and Labour got away with doing the same thing through these loans. They’re not supposed to be paid back. They’re just a way of getting graduates to pay another % of their income for 35 years.

      It’s known that most people will never pay back the full loan + the interest. But this is hidden with rhetoric about graduates earning a higher average salary. The narrative is starting to become undone, though, as the cost has gone up from £1k to £3k to £9k+ per year, and as the reality of the job market has proven that the real link was always between parental income / wealth and their child’s future earnings. It’s a coincidence that the children of wealthier parents are also more likely to go to university.

      Then they sold the loans to private capital, who put the interest up retroactively.

      The problem is that these loans are now given out and taken at above rate of inflation interest, and people still take them, knowing that most people will never pay off the loans.

      There’s an equation somewhere online. Maybe on the moneysavingexpert website, that tells people whether to overpay on their student loan. IIRC, it’s only worth overpaying if the person earns between £40k and £45k. Above that, and the person will pay it off quickly, anyway. Below that, and the debt will be forgiven long before the loan will be paid off. But these figures only made sense when interest equalled the inflation rate. No idea what the advice to new students is.

      But the government and universities are brewing trouble by creating so many highly-educated people and then abandoning them to a life of debt (not quite so vulture-like as in the US, though – students only pay back if they are earning above a certain amount (the amount changes depending on what year the loan was first taken)). And it will be the same decision-makers who wonder why Corbyn got so much support from young people with degrees.