Debt management differs 'depending on degree date'
Debt management differs 'depending on degree date'
- Tuesday, 28 April 2009Ex-students could find their ability to
manage debt depends on when they graduated.
Credit Action explains that, since 1998, the interest rate charged on student loans has been linked with inflation on the retail prices index (RPI).
But if the base rate of interest set by the Bank of England falls to one percentage point or more below RPI, the interest rate charged should be adjusted to stand at the base rate plus one percentage point.
With RPI currently falling, this could make debt management easier for many graduates - with the potential to see interest rates on student loans turn negative if inflation drops far enough.
However, for those whose loans were arranged before 1998, the ability to
manage debt could be a little more difficult.
This is due to the fact that their interest rates are fixed at that year's RPI rate of 3.8 per cent, explains Credit Action.
Credit Action previously praised the Hollywood movie Confessions of a Shopaholic for its fair portrayal of how overspending can lead to debt difficulties.

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