Loan system running costs soar fourfold

Running costs at the Student Loans Company are nearly four times what they were when the scheme started. In the academic year 1999-2000 - the most recent for which figures are available - running costs were £48.6 million, compared with £13 million in 1990-91.

There were huge increases to costs in the late 1990s. Over the period 1996-2000, the number of loans advanced per year grew by 19 per cent, but the SLC's running costs grew by 112 per cent.

The average yearly growth in running costs was about 29 per cent for this period, compared with some 11 per cent from 1990-96. Costs grew by a third between 1998-99 and 1999-2000.

The figures were presented by education minister Margaret Hodge as part of a written answer to a question from Labour MP Ashok Kumar. A spokesman for Dr Kumar said: "There appears to be burgeoning bureaucracy. There is a massive increase in loans issued, but most of them are standard." He added that the increase in costs seemed disproportionate.

A spokesman for the Department for Education and Skills said preparations for the student support scheme introduced in 1998-99 had affected running costs. "There was also quite a large increase in the number of customers entering repayment," he added.

The company said the costs had risen because of three factors: a 50 per cent increase in the number of accounts; the stage that customers have reached in the process of borrowing and repaying; and the cost of setting up the repayment of new loans through the tax system.

The company has also taken on hardship loans, loans for part-timers, payment of residual grants, payment of the public contribution to tuition fees and managing the course database.

Owain James, president of the National Union of Students, said: "The NUS will be raising the issue of operating costs with the SLC at our next formal meeting. (Our) main concern remains efficient service provision by the SLC. This year once again thousands of students didn't receive their payments on time and graduates have problems with a lack of flexibility when negotiating their repayments."

Provisional figures for 2000-01 show the number of loans advanced as 759,000.