Student Loan Repayments

You do have to laugh at this:

The loans are offered to students on the basis that interest is added in line with inflation and therefore they are in effect interest-free. In 2003, the Government changed the official measure of inflation from the Retail Price Index (RPI), to the Consumer Price Index (CPI), which does not include housing costs or council tax.

Since then, RPI has risen at a far higher rate – it is currently at 4.8 per cent, with CPI at 2.3 per cent. The Government is still using RPI to calculate the interest on student loans.

Small print buried in the Budget shows that ministers expect that the RPI will continue to be far higher than the CPI – giving the Treasury an additional £483 million a year in interest repayments.

Not, however a funny haha laugh, more an astonished giggle at the sheer mendacity on display.

All of the goverment\’s outgoings are inflation updated using the CPI. But it appears that this isn\’t good enough for the government collections.

As ever, you can tell what people really think by watching what they do. So the government really thinks that the true inflation rate is the RPI.

7 thoughts on “Student Loan Repayments”

  1. “All of the goverment’s outgoings are inflation updated using the CPI.”

    This is just plain wrong, Tim. They’re mostly uprated by the RPI, which remains the preferred measure for the cost- of – living, or a version of it (one excludes housing cost).

    The CPI is its preferred measure of the rate that Bank of England should target for monetary policy.

    Tim asdds: Public sector wages certainly aren’t being upgraded by the RPI.

  2. “Tim asdds: Public sector wages certainly aren’t being upgraded by the RPI.”

    Exactly, you get the problem of these junior doctors being given pay increases based on CPI while having to repay masses of loans at RPI.

  3. “Tim asdds: Public sector wages certainly aren’t being upgraded by the RPI.”

    They aren’t being upgraded by CPI either.

  4. RPIX? Are you sure Kay? I had thought they use RPI, but that for some issues the Chancellor can change the index on whim.

  5. “RPIX? Are you sure Kay? I had thought they use RPI, but that for some issues the Chancellor can change the index on whim.”

    All mine are RPIX. He can’t change the issued ones, of course, and not being in possession of millions of pounds I failed to join in the recent DMO auctions. Thus all mine are fairly old, with the old 2.5% coupon (all the new issues have stupidly low coupons: might as well buy shiny shiny gold).

  6. All I know is the government are milking my family dry. My girls left university a year ago and neither are earning enough to start paying the load off. We were horrified when a statement came for each of them with interest each month added on amounting to nearly £1,000 each! Alot of my friends thought interest free meant no interest until they started earning over £15,000. I think it is scandelous.

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