The Student Loans Company and interest payments

The Government is being accused of sharp practices. Well, nothing new there. This time however, it has a good explanation.

It is all to do with the petition on the 10 Downing Street website about the student loans scheme.

Some background. Ex-students who have taken out education loans from the Student Loans Company (SLC), get their repayments deducted from their salaries by their employers and sent on to the taxman. The problem is that, as the SLC only updates borrowers accounts annually, some people were concerned that they were being charged interest on payments that they had already made on a month-to-month basis. If true, this woud mean that that the SLC was charging interest on payments already made, and channelling the money into their coffers.

Not so, says the Government in a statement on the petitions website:

But while borrowers' accounts are only updated annually, the SLC is careful to ensure no borrower pays any additional interest as a result of this delay. The total annual repayment received from each borrower is credited to their account as twelve 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. We can assure you that the Government does not gain any extra income nor does any borrower pay too much interest.

That should clear up any confusion. However, the Government could not resist adding:

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

In other words, shut up and thank us for our largesse, you moaning ingrates.

Photo credit. © Photographer: Vallentin Vassileff | Agency: Dreamstime.com