The Secretary of State for Business, Innovation and Skills (Vince Cable)
I am today announcing that the remaining publicly owned mortgage-style student loan book will be offered for sale by the Government under the Education (Student Loans) Act 1990 as amended by the Education (Student Loans) Act 1998. The sale will take place in conjunction with the Scottish Government, the Department for Employment and Learning in Northern Ireland and the Student Loans Company.
Mortgage-style loans were available to eligible higher education students who were enrolled between 1990 and 1998. Borrowers are required to repay in fixed monthly instalments over a defined period, typically five or seven years. Interest is charged at a rate equivalent to the retail prices index. Repayments can be deferred for a year at a time if a borrower’s income is below the threshold, which is 85% of the national average earnings. Currently the threshold is £27,813. There will be no change to borrowers’ terms and conditions as a result of the sale.
The Scottish Government and the Northern Ireland Executive are responsible for loans issued by those respective Administrations and both have agreed the sale. English and Welsh loans are the responsibility of the Department for Business, Innovation and Skills.
There were two previous sales of mortgage-style loans in 1998 and 1999. The remaining loans owned by the Government are mostly either in deferment or in arrears, so total annual repayments are low.
The loans to be offered for sale have a face value of around £900 million but, due to the low level of repayments in relation to the loan book, the market value will likely be significantly lower. The Government recognise that the private sector may improve the collection of repayments using their expertise. Additionally, they will provide operational benefits to the Student Loans Company (SLC) as the significant majority of the administration is transferred to the buyer. This sale will reduce public sector net debt and forms part of a wider effort to maximise the value of Government assets.
We will be assessing all potential buyers against a strict set of criteria and a sale will only proceed if value for money for the taxpayer and borrower protections consistent with the law are assured. The sale will not include any income contingent repayment (ICR) loans, therefore no current students or borrowers who solely took out an ICR loan after September 1998 will be affected.
More details of the sale will be published by BIS in due course.