Azara Blog: Student loan petition on Downing Street website

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Date published: 2007/04/24

The BBC says:

The government has denied claims that graduates are being overcharged in the way they pay back their student loans.

More than 62,000 people have signed a petition on the Downing Street website which says - wrongly - that interest repayments are being miscalculated.

It assumes borrowers are being charged interest on their loan for the whole year despite paying it off in monthly instalments through their salaries.

Number 10 says interest is calculated daily with payments taken into account.
A government statement placed on the petition website said the confusion had arisen from the fact that the Student Loan Company updates borrowers' accounts annually.
"The total annual repayment received from each borrower is credited to their account as 12 equal monthly payments in the year they were made, and the interest on the remaining balance is calculated on a daily basis each month to match."

The petitioners had thought that the money from the payments had been earning interest for the government.

But Downing Street added: "We can assure you that the government does not gain any extra income nor does any borrower pay too much interest.

"It is also worth adding that interest paid on student loans reflects inflation, and is not a commercial rate of interest like those charged for bank loans."

Downing Street will rue the day they ever allowed the petition website to be set up. This student loan petition will end up being one of the most signed so far. And yet it is based on a complete fantasy. (Unless Downing Street is lying completely, which seems unlikely, for once.) So 62000 people have been sucked in by some viral marketing campaign. It will be interesting to see how many more people sign the petition in spite of the clear statement on the petition page that this is indeed all based on a fundamental misunderstanding. And of course if the government had wanted student loan interest not to be calculated on a daily basis then they would have been perfectly right to have done so, if they made it clear this was what they were doing. There are still plenty of mortgages where if you pay extra money in (often under a certain amount), it doesn't count against the capital until the end of the year. This is not a novel concept.

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