Jump to content
House Price Crash Forum
Sign in to follow this  
Sancho Panza

Govt Sells £900Mn Student Loan Book For £160Mn

Recommended Posts

Sky 25/11/13

'The Government has offloaded mortgage-style student loans totalling almost £900m to a private debt collection agency for £160m. The sale - revealed over the weekend by Sky's City Editor Mark Kleinman - covers loans taken out by 250,000 students who began courses between 1990 and 1998.

The Department for Business Innovation & Skills (BIS) said Erudio Student Loans was selected as the successful bidder through a "competitive process."

It said its offer was judged to represent the best value for money for the taxpayer and the price paid exceeded the estimated value to the Government of retaining the loans.

Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms.

BIS argued the private sector was thought best placed to collect the outstanding debt as it allowed the Student Loans Company (SLC) to concentrate on administering newer loans.

Universities and Science Minister David Willetts said: "The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160m.

"The private sector is well placed to maximise returns from the book which has a deteriorating value.

“The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans.

"Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans."

The mortgage-style loans at the centre of the sale were the last of their kind on the Government's books and had a poor recovery rate.

Under the terms, borrowers are required to repay in fixed monthly instalments over a set period of five or seven years with interest charged at a rate equivalent to the Retail Prices Index (RPI).

But repayments can be deferred for a year at a time if a borrower’s income is below a threshold of 85% of national average earnings - currently £28,775.

The coalition is drawing up plans to sell the entire outstanding student loan-book, which has a face value of roughly £40bn.'

Share this post


Link to post
Share on other sites

It doesn't actually reduce it by £160m though.

There's 900m owed - and they've got 160m for it so there's 740m still debts that will now never be repaid to the govt.

Share this post


Link to post
Share on other sites

And about the earning potential of new graduates.

I'm obviously not as charitably minded as you - I think ministers might actually believe their own propaganda. B)

Share this post


Link to post
Share on other sites

It doesn't actually reduce it by £160m though.

There's 900m owed - and they've got 160m for it so there's 740m still debts that will now never be repaid to the govt.

Or maybe it is a good deal.

At the moment 120m worth is being repaid.

So they've got more back than currently going in .. and without costs being incurred to chase the 40% not paying you'll not get more back.

Share this post


Link to post
Share on other sites

Amazing that 40% are defaulting. And I would guess that most of the 46% earning under the threshold are well on track to get the loan written off in a decade or two.

Share this post


Link to post
Share on other sites

Amazing that 40% are defaulting. And I would guess that most of the 46% earning under the threshold are well on track to get the loan written off in a decade or two.

I fear that this country may go down the same route as the US, where student loans are not expunged even by bankruptcy and where disabled war veterans have their disability cheques taken to pay the loan companies.

Share this post


Link to post
Share on other sites

So why didn't they just offer free education to start with as in the past......free that is for those that could make best use of it.....the rest should really be educated enough to a set standard before they leave existing free education anyway.......what a carry on........and still there are not enough paying jobs to enable full repayment, get into debt whilst unemployed, then stay underemployed....you couldn't make it up, or perhaps you could. ;)

Share this post


Link to post
Share on other sites

I fear that this country may go down the same route as the US, where student loans are not expunged even by bankruptcy and where disabled war veterans have their disability cheques taken to pay the loan companies.

Surely student loans fall outside bankruptcy in the UK? They have to be repaid, bankrupt or not.

http://www.becomingbankrupt.co.uk/bankruptcy-your-student-loan.html

Share this post


Link to post
Share on other sites

Told you student loans are designed specifically NOT to be repaid.

Current ones even more so.

They're designed to generate credit into the system during a housing deflation, levy an ongoing tax on graduates, then be (largely) written off in 20-30 years time. A form of long run QE if you like.

Share this post


Link to post
Share on other sites

So why didn't they just offer free education to start with as in the past......free that is for those that could make best use of it.....the rest should really be educated enough to a set standard before they leave existing free education anyway.......what a carry on........and still there are not enough paying jobs to enable full repayment, get into debt whilst unemployed, then stay underemployed....you couldn't make it up, or perhaps you could. ;)

Because debt fascists would (wrongly) believe it would increase interest rates.

Share this post


Link to post
Share on other sites

Amazing that 40% are defaulting. And I would guess that most of the 46% earning under the threshold are well on track to get the loan written off in a decade or two.

I think you have misread 40% are not paying back as they don't earn enough, I seem to recall the loans only last for 25 or 30 years at which point it gets written off. Although future graduates should look at the stats for older graduates to see what the earning potential is, if 40% aren't repaying no wonder the rules get rewritten for new graduates to lower the threshold.

Share this post


Link to post
Share on other sites

I think you have misread 40% are not paying back as they don't earn enough, I seem to recall the loans only last for 25 or 30 years at which point it gets written off. Although future graduates should look at the stats for older graduates to see what the earning potential is, if 40% aren't repaying no wonder the rules get rewritten for new graduates to lower the threshold.

"Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms."

Its 25 years isn't it for this lot?

So if 1998 is the last loan in this set, then there's a maximum of 10 years possible repayments left on there.

Share this post


Link to post
Share on other sites

"Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms."

Its 25 years isn't it for this lot?

So if 1998 is the last loan in this set, then there's a maximum of 10 years possible repayments left on there.

I wonder how many are to fellow EU citizens who have returned home and disappeared from the loan repayment system.

Share this post


Link to post
Share on other sites

The disparity between the book value and the sale price does make one wonder about the motivations of the Coalition ministers.

This is historic stuff being written down. As we all knew it would.

The current lot is basically a graduate tax under another guise. I expect large chunks of it will be written off in a similar manner.

Share this post


Link to post
Share on other sites

So has the taxpayer took a £740m loss on these loans?

Only by an accounting trick that pretended the taxpayer wasn't paying for those students in the first place.

Share this post


Link to post
Share on other sites

"Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms."

Its 25 years isn't it for this lot?

So if 1998 is the last loan in this set, then there's a maximum of 10 years possible repayments left on there.

I took it to mean something different I read it as 40% aren't repaying because they didn't have to!! So from previous loans only 14% are repaying the other 86% aren't? 46% don't earn enough and 40% have simply disappeared from the system and the presumption is these 40% should be repaying?

Share this post


Link to post
Share on other sites

I took it to mean something different I read it as 40% aren't repaying because they didn't have to!! So from previous loans only 14% are repaying the other 86% aren't? 46% don't earn enough and 40% have simply disappeared from the system and the presumption is these 40% should be repaying?

No they'd be included in the 46% of people who don't earn enough then... making it 86%

Which would be interesting stats to show students planning to go to uni at £9k a year.

Share this post


Link to post
Share on other sites

Surely student loans fall outside bankruptcy in the UK? They have to be repaid, bankrupt or not.

http://www.becomingbankrupt.co.uk/bankruptcy-your-student-loan.html

No, that's the point about bankruptcy. You lose all your debt and start afresh, a sort of healing process.

But only a few years back, the US specifically changed Federal law to prevent this under bankruptcy. so, there, you can never, ever lose your liability - it follows you right to the grave.

Share this post


Link to post
Share on other sites

No they'd be included in the 46% of people who don't earn enough then... making it 86%

Which would be interesting stats to show students planning to go to uni at £9k a year.

'Congrats, there's a 46% chance you won't have to pay for your education - just be sure to be a undemployed/unambitious dosser creative type, if you want a proper career best swap with an American..'

Share this post


Link to post
Share on other sites

No, that's the point about bankruptcy. You lose all your debt and start afresh, a sort of healing process.

But only a few years back, the US specifically changed Federal law to prevent this under bankruptcy. so, there, you can never, ever lose your liability - it follows you right to the grave.

UK student loans from the Student Loans Company are non-dischargeable by bankruptcy.

Share this post


Link to post
Share on other sites

UK student loans from the Student Loans Company are non-dischargeable by bankruptcy.

Really? You have floored me with that - it truly is debt servitude.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   209 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.