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Student loan debts to be cut as lender pays interest

03/09/2009

The Student Loans Company (SLC) is to begin paying interest to some of its borrowers, rather than charging it, after RPI (Retail Prices Index) inflation went negative earlier this year.

The SLC will pay 0.4% interest on student loan debt to graduates who started university before 1998, due to a `loophole` in repayment terms and conditions.

Each year, interest rates on student loans are calculated based on RPI inflation from the previous March. In March this year, RPI stood at -0.4%, meaning some student loan interest has also gone negative.

Due to the interest payments, someone owing £10,000 of student debt will owe £9,960 in a year`s time.

However, thanks to new rules implemented in 1998, the interest payments will not apply to graduates who started university after 1998 - who will simply pay no interest on their debt.

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More than 4 million fear they`ll be made redundant 16/12/2010 - According to R3`s quarterly personal debt tracker, more than 4 Consumers took on more mortgage debt in July 26/08/2010 - Consumers took on £2bn more mortgage debt than they repaid Debts called in by parents 26/08/2010 - According to research, `the bank of Mum and Dad` is Teenagers `scared of debt` 19/08/2010 - Nearly two thirds of teenagers are `scared` of debt, according