I recently requested a statement from SF England regarding my student loan outstanding debt. Once I had this I was leafing through but started to become confused about their methods of calculating compound interest.
If you consider the opening transaction and the interest calculation:
You observe that in the first months interest calculation (I've omitted the exact dates for security), with an interest rate of 6.3%, a figure of £5.35 from an initial total of £1179.75. Obviously 6.3% of the initial value is not 5.35.
Presuming that there might have been some hidden fees or slight deviance given that it was the first month I began to look into later months to see if the same trend continued:
I am reasonably certain I have the definition of compounding interest to be correct. Taken from the definition here: https://www.thecalculatorsite.com/articles/finance/what-is-compound-interest.php
The examples I have shown do not have any repayments on the outstanding so I would have thought the calculation would have been simple, the interest rate of that month applied to the running total and then added together for next months running total. I have attempted to contact SFE on this matter but have achieved nothing.
Is there anything that I have omitted from my own calculations or gaps in my knowledge? Or perhaps anyone can shed some light on what might be happening.