Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, how much and what proportion of the downward revaluation of the student loan book in the latest outturn reflects (a) revised graduate earnings and repayment assumptions and (b) changes in the discount rate used to value future repayments.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
As of 31 March 2025, the fair value of the student loan book was £157.9 billion, representing a £6.9 billion increase on the opening balance of £151.0 billion.
The fair value loss in the 2024/25 financial year was £8.6 billion. Of this, the change in the discount rate brought about a £280 million gain. The residual loss was £6.7 billion, which was impacted by changes in macroeconomic determinants such as the Office for Budget Responsibility’s earnings outlook, which was more pessimistic than in the prior year.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what estimate she has made of the net present value impact on the public finances of capping total interest on Plan 2 student loans at 20 per cent of the original principal.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The department does not hold analysis on the impact on the public finances of capping total interest on Plan 2 student loans at 20% of the original principal value of the loan.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what estimate she has made of the value of interest repayments on Plan 2 student loans net of (a) the Government’s cost of financing student loan outlay, (b) expected write-offs and (c) administrative costs.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
Repayments made against accrued interest are not separated from repayments made against the borrowed portion of the loan.
The department publishes an estimate of the subsidy portion of student loan outlay in the form of the Resource Accounting and Budgeting (RAB) charge. The RAB charge for Plan 2 outlay in England in 2024/25 was 32%.
The RAB charge is calculated as the present value of student loan outlay less expected future repayments, discounted by inflation plus the financial instrument discount rate. Expectations of interest, write offs and the government’s borrowing costs are factored into the fair value of student loans on issuance. In valuing the loan book at financial year end, estimated operational costs of servicing student loans are accounted for, in accordance with International Financial Reporting Standards. Higher interest relative to inflation reduces the forecasted cost of the loan system due to increased future repayments.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what proportion of Plan 2 student loan borrowers have repaid in real terms more than (a) 100 per cent, (b) 120 per cent and (c) 150 per cent of the amount originally borrowed; and how many of those borrowers have (i) an outstanding balance and (ii) fully repaid their loans.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The department does not hold data that allows us to provide the proportion of the amount originally borrowed that has been repaid in real terms.
The projected percentage of Plan 2 student borrowers in 2022 who are expected to fully repay their loan in real terms is available at:
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what was the repayment forecast for Plan 2 student loan graduates in each of the last five years compared to actual repayments in each of those years.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The actual repayments for plan 2 are published in Figure 14 on this page:
The forecasts for Plan 2 are published here:
Forecasts are always likely to deviate from actuals due to uncertainty around many factors. Forecasts are based on the most up to date inputs available. Even looking only a year into the future, factors affecting repayments are likely to deviate from model inputs, especially in times of greater economic uncertainty. Over time, improvements to modelling methodology also affect accuracy of forecasts.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what estimate her Department has made of the average additional years in repayment for Plan 2 student loan borrowers attributable to charging interest at RPI plus up to three percentage points compared with CPI only.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The department does not hold analysis of the impact on the number of additional years of repayment for Plan 2 borrowers attributable to the level of interest charged.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what assessment she has made of the adequacy of the interest charged on Plan 2 student loans for meeting the Government’s cost of (a) borrowing to finance those loans and (b) estimated write-offs.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The estimated write offs are reflected in the Resource and Accounting Budget (RAB) charge, the government subsidy anticipated on student loans issued in any particular financial year. The RAB charge is forecast at 32% of total full-time plan 2 loans issued in 2024/25.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what assessment she has made of the potential impact of effective marginal deduction rates exceeding 50 per cent on Plan 2 student loan borrowers’ labour supply, including decisions on a) overtime, b) hours worked and c) promotions.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
Plan 2 loans were designed and implemented by the previous government and, given the inherited fiscal situation, the department is making tough but necessary decisions.
Graduates only begin repaying their student loan once earnings exceed the earnings threshold, after which they pay 9% of income above that level. At the end of the tax year, a borrower with total earnings below the annual student loan repayment threshold, may reclaim any repayments made where a pay period threshold was exceeded.
If earnings fall below the repayment threshold, borrowers are not required to make repayments, regardless of their plan. Any outstanding loan, including interest accrued, will be cancelled after the loan term ends, and debt is never passed on to family members or descendants.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what comparative assessment her Department has made of the (a) average repayment duration and (b) total interest paid over the life of the loan for (i) male and (ii) female Plan 2 student loan borrowers.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
The median repayment duration of loans for students in the final cohort of Plan 2 borrowers, those who commenced study in the 2022/23 academic year, is 30 years. This is consistent with the average borrower in this cohort not being forecast to fully repay their loan and instead have some loan debt written off after 30 years. Information on repayment behaviour for this cohort is published here: https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2022-23.
The department does not hold figures comparing the lifetime repayment duration for male and female Plan 2 borrowers or the total interest paid over the life of the loan.
Asked by: David Reed (Conservative - Exmouth and Exeter East)
Question to the Department for Education:
To ask the Secretary of State for Education, what estimate she has made of the long-term fiscal impact of replacing RPI with CPI for Plan 2 student loan interest.
Answered by Josh MacAlister - Parliamentary Under-Secretary (Department for Education)
Interest rates on student loans have been consistently linked to a widely recognised and adopted measure of inflation. Interest rates are set in legislation in reference to the Retail Price Index (RPI) (from the previous March) and are applied annually on 1 September until 31 August.
The Office for National Statistics has undertaken a substantial programme of work over the past two years to enhance how inflation is measured and this will be carried over into student loans. The Office for Budget Responsibility has confirmed that from 2030 (at the earliest), movements in RPI will be aligned with Consumer Prices Index including owner occupiers' housing costs as viewed here: https://obr.uk/box/the-long-run-difference-between-rpi-and-cpi-inflation/.