Loan sale angers NUS

The sale of student loans to a consumer debt company “doesn’t make economic sense”, according to the National Union of Students

November 25, 2013

Ministers announced today the £160 million sale of 250,000 outstanding student loans owed by people who began courses between 1990 and 1998.

The sale does not cover more recent income-contingent loans.

The older “mortgage-style” student loans being sold have a face value of £890 million, although approximately 46 per cent are earning below the repayment threshold, 14 per cent of borrowers are still repaying, and 40 per cent are not repaying their loans in accordance with their terms.

A statement from the Department for Business, Innovation and Skills said that Erudio Student Loans - “experts in consumer debt” - had been selected as the successful bidder after “a competitive process”, and that the sale price “exceeds the estimated value to the government of retaining the loans”.

“The private sector is thought best placed to collect the outstanding debt, allowing the Student Loans Company to concentrate on administering newer loans,” it said.

However, Toni Pearce, president of the NUS, said the sale meant that the public was “subsidising a private company making a profit from public debt, which is incredibly problematic”.

“The simple fact is that having these loans on the public books would be better off for the government in the long run,” she said. “Selling off the loan book at a discount to secure a cash lump sum now doesn’t make economic sense.”

There were two previous sales of mortgage-style loans in 1998 and 1999, which passed £2 billion worth of loans to the private sector. Of the one million borrowers who were retained by the SLC following the previous sales, 69 per cent have fully repaid their debt.

David Willetts, the universities and science minister, said: “The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160 million. The private sector is well placed to maximise returns from the book which has a deteriorating value.”

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Reader's comments (2)

If 46 per cent of 1990s students are earning below the repayment threshold - probably quite low in today's prices - then how on earth will today's students pay off their debts, particularly as they are walking into a weak economy (while 1990s students came of age in the boom of early 2000s)
It's actually 46 per cent of those who haven't repayed the loan - not 46 per cent of everyone who had one. Still, a valid point since one of the changes made with the introduction of £9k fees was a higher wage threshold at which students start to pay back. One to watch.

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