News3 mins ago
Wouldn't this have been the wrong way round?
Usually if you repay a loan early, you get a reduced final figure. I am incredulous this idea was even discussed in government.
http://www.bbc.co.uk/news/education-17053581
http://www.bbc.co.uk/news/education-17053581
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Credit Agreements often have early settlement penalties. It's because in effect, the finance company is losing out on its projected income from charging interest over the longer period.
The whole thing is a mess anyway. The government lectures people about bringing down personal debt and providing for old age whilst normalising the idea for an generation that you start adult life with a massive debt that may never be repayable.
The whole thing is a mess anyway. The government lectures people about bringing down personal debt and providing for old age whilst normalising the idea for an generation that you start adult life with a massive debt that may never be repayable.
Nope - in the perverted/inverted logic of the loan shark it all makes sense.
Someone has contracted to pay you (say) £10,000 in interest over 30 years - but they give you £1,000 and clear the loan after a year or two - you have lost a projected income stream for the next 28 years, and probably can't invest the capital they have returned in anything like such an effective way. So you charge them for your lost income - mad but true.
Someone has contracted to pay you (say) £10,000 in interest over 30 years - but they give you £1,000 and clear the loan after a year or two - you have lost a projected income stream for the next 28 years, and probably can't invest the capital they have returned in anything like such an effective way. So you charge them for your lost income - mad but true.
But in this case Zheul there is no profit making Finance Company- the interest rate is set at the inflation rate.
I agree largely with your point about debt, but the student loan differs from other loans in that you only repay if your income reaches a certain level (so in effect it's a tax), debt collectors will never come round, and it's written off after so many years anyway.
One concern for me is the number of students from overseas who take out loans and then disappear without trace without repaying them
I agree largely with your point about debt, but the student loan differs from other loans in that you only repay if your income reaches a certain level (so in effect it's a tax), debt collectors will never come round, and it's written off after so many years anyway.
One concern for me is the number of students from overseas who take out loans and then disappear without trace without repaying them
I agree with all the above, being penalised for paying off the loan in less than 30 years (?) is ridiculous. For what it's worth, my youngest son, single and in his mid -twenties, is regularly paying additional amounts off his loan under the current scheme, to clear the debt as soon as possible : he doesn't want to be still paying in the future when he may well have mortgage, marriage and parental demands.
<<the student loan differs from other loans in that you only repay if your income reaches a certain level>>
The students I know are very conscious that they have a 'loan' hanging over them. Hardly healthy I think especially when combined with unemployment.
Perhaps we shouldn't be surprised if more people gradually sink into despair and depression.
Or are you suggesting it's ok for students to disregard the loan ('graduate tax') <<that will be written off anyway>> and not take it seriously?
The students I know are very conscious that they have a 'loan' hanging over them. Hardly healthy I think especially when combined with unemployment.
Perhaps we shouldn't be surprised if more people gradually sink into despair and depression.
Or are you suggesting it's ok for students to disregard the loan ('graduate tax') <<that will be written off anyway>> and not take it seriously?
I don't think factor that overseas students can take out such loans - my son certainly had to establish his nationality.
There may be an issue with some UK nationals disappearing but this is probably a small number compared with say those who do not meet the repayment income levels for example.
Many people find that there is a penalty in paying off their mortgage early unless they've made special provision.
It's because the finance companies are planning on a certain return on their capital and paying off early reduces this.
The Government want to sell off the student loan business and so wanted to make it as close to business terms as possible.
There may be an issue with some UK nationals disappearing but this is probably a small number compared with say those who do not meet the repayment income levels for example.
Many people find that there is a penalty in paying off their mortgage early unless they've made special provision.
It's because the finance companies are planning on a certain return on their capital and paying off early reduces this.
The Government want to sell off the student loan business and so wanted to make it as close to business terms as possible.
I don't think all loans are necessarily bad- mortgages for example are an accepted way of funding a house.
I'd prefer not to have a loan system but I know that at least my sons only pay it back when they are earning enough, and because it's only paid on earnings over £15000 (to rise next year), it's something they can budget for, and if they ever lose their job at least this loan is put on ice until they are earning enough again.
I think it's mainly a way of reducing the costs of the ridiculous expansion of university places, but I can also see it's making students think about whether they really do want a degree and that things in life have to be paid for.
I'd prefer not to have a loan system but I know that at least my sons only pay it back when they are earning enough, and because it's only paid on earnings over £15000 (to rise next year), it's something they can budget for, and if they ever lose their job at least this loan is put on ice until they are earning enough again.
I think it's mainly a way of reducing the costs of the ridiculous expansion of university places, but I can also see it's making students think about whether they really do want a degree and that things in life have to be paid for.
It was Labour's way of helping the poor student. If he was unable to pay it back early why the the rich student get away from paying interest over many decades? It would have been fairer for the poorer student to have his interest waived and the rich student have a redemption clause on paying back early.
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