Four in frame for student debt and billion-pound sweetener

December 5, 1997

A BILLION-pound sweetener may have to be paid to the private sector purchaser of the student loan debt at a time of rising university debt, the House of Lords heard this week. Baroness Maddock, making her maiden speech during the second reading of the Education (Student Loans) Bill on Tuesday, said that the subsidy, which the government will pay to whichever company buys the debt, could amount to far more than the total money ploughed back into institutions from tuition fees and proceeds from the sale of the loan debt during the lifetime of this parliament.

Peers were also concerned about a possible conflict between provisions in the student loans bill and those in the Teaching and Higher Education Bill, which will receive its second reading in the Lords next Thursday. Many were worried that the purchaser would no sooner sign the contract than the Teaching and Higher Education Bill would provide for the repeal of the original 1990 Student Loans Act and the new Student Loans Bill.

Education minister Baroness Blackstone confirmed that four companies had been shortlisted and are due to make their final bids to take over the loan debt in January. She could not reveal the amount of the subsidy because it was commercially sensitive.

She said that the new Student Loans Bill had nothing to do with the "new regime" proposed in the Teaching and Higher Education Bill. She said that all existing students would continue to pay under the old system, though this officially ceases from next October when the new system begins.

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