by: adminPosted on: June 18, 2021
How to get your student loan payments in the UK
The government is promising to make student loans cheaper for the UK's poorest by allowing borrowers to borrow from their parents, rather than lenders.
But there's a problem: the government hasn't even released its own plan to do this.
What we know so far about the new plan:It's the government's plan for a lower interest rate for borrowers, but not one that will see them paying the full amount of their loans.
Instead, it's going to allow borrowers to defer their loans by a year, rather the normal two years.
And, crucially, borrowers will be able to borrow up to the value of the loan, instead of the standard 2% of their income.
"This new proposal to defer repayment of a loan from its full value is the first of its kind in the United Kingdom," a government statement reads.
"The Government will also be introducing a new and more generous repayment scheme to help more people avoid crushing student debt."
Why this is so controversial:Some economists believe the higher interest rate won't actually help borrowers, because borrowers who borrow from relatives, friends or other family members will actually pay more than borrowers with private lenders.
The government has said it's doing this to encourage the repayment of loans from wealthy families.
But the new scheme also means the government will be paying less in interest, which will make it more expensive to borrow money.
Why you need to know:This new scheme will mean that if you have a £5,000 loan and borrow £1,000 from your parents, you'll pay £3,000 more than if you borrow from your grandparents.
But you'll also be paying interest of up to 10% of the balance, meaning your total loan repayment will actually be £1.80.
This will affect people with the highest incomes, as well as those with the lowest.
The scheme will also mean you won't have to repay the full value of your loan within five years of its commencement.
There are several other changes to the repayment scheme that are designed to help lower-income people.
The most notable is the reduction in interest rates, which are expected to reduce repayments by 25%.
But there's also a new 'credit risk adjustment' scheme, which is meant to help people with higher debts.
This is meant, for example, to help borrowers with student loans that are still on the books, but have not been paid off.
How it will work:If you borrow £2,000 to fund a home purchase, the government says that it will send your loan to the property lender.
If you repay it within 10 years, you will receive a lump sum of £300 from the loan.
If it's owed by someone else, they will get £150 from your loan, with interest of between 6.5% and 10%.
If you are still owing a loan when it's due, you can apply for a credit risk adjustment, which means you will be required to repay your loan less quickly.
But your interest will still be the same as it would be if you hadn't been paying it off.
The government says it will use these savings to help pay for the £3.8bn Student Loans Company loan relief scheme, but will not set a new rate, or change the interest rate.
This means you'll still be paying an interest rate of 6.75% on your loan.
So how does this affect the rich?
It's unclear exactly how this will affect wealthy borrowers.
The scheme has not been fully implemented yet, so the exact impact on borrowers will depend on the terms of their loan.
But it does mean that borrowers with higher incomes will be hit harder than those with lower incomes, and poorer borrowers will pay more.
What's the UK banking industry doing about it?
There are concerns that the new system will cause banks to cut their lending standards.
The Financial Conduct Authority (FCA) says the scheme will increase the risk of "fraud, identity theft and fraud with intent to defraud".
It says that the financial sector needs to be prepared for the risks, because the new rules will mean there will be a significant impact on the financial services industry.
"The government's proposed new loan repayment scheme could potentially have a significant and long-lasting impact on some UK-based banks," the FCA warns.
"It could lead to increased stress in financial institutions, particularly in relation to their ability to withstand such risks."
What we already know about the scheme: It's due to come into force in March 2020.
It is likely to affect more borrowers than those who already owe student loans.
It will be funded by the Government's new £3bn Student Loan Company relief scheme.
Who else will be affected?
The government is also proposing that all of the private lenders will have to make their loans eligible for the scheme.
These include Barclays, Santander, and Lloyds.
But they will also have to offer loans
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