Helping their children get through university is one of the reasons people may look at pension loans. But for those students whose parents are not helping them out, the debt that has built up by the time they finish their studies can be crippling. One expert is arguing that compound interest is making the debt much worse than it needs to be, and that introducing a flat rate of interest on student loans would help to alleviate some of the problems they can cause.
BT’s Money website reports –
“LoveMONEY writer Anna Jordan wants the Government to bring in student loans with a simple, flat-rate of interest… Students leaving university are shouldering an average debt of £44,000, which is majorly ramped up by interest… The interest rate on controversial Plan 2 loans is set to rise from 4.6% to an eye-watering 6.1% in September, making the debt even harder to pay back… What’s worse is that students have no idea how this interest will balloon when they apply for a loan… The bottom line is that the student loans system is completely unfair… Students are being punished with unreasonably high repayments which make a significant dent in their earnings throughout their career… Even though the income threshold remains the same, graduates now are worse off than in previous years and graduates in years to come will be worse off than graduates now. The problem will just keep escalating until action is taken.”