Lord Barnett – 2014 Parliamentary Question to the Department for Business, Innovation and Skills

The below Parliamentary question was asked by Lord Barnett on 2014-05-06.

To ask Her Majesty’s Government, further to the answer by Lord Ahmad of Wimbledon on 26 March (HL Deb, col 528), what was the basis on which he described the sale of the student loan book for £160 million as value for money for the taxpayer”; and what was the original value of the loans.”

Lord Ahmad of Wimbledon

The Mortgage Style loans offered for sale had a face value of around £890 million.

The sale of the Mortgage Style Loan Book was value for money as the purchase price exceeded the value of retention to Government.

The real value of the book is below the face value of the loans because of the subsidised nature of the loans and their age. These loans attract low interest rates and have an earnings threshold for repayment. The age-related write off combined with the earnings threshold means some borrowers never repay.

The sale of Mortgage style Loans also allowed the Student Loans Company to focus on its core business of supplying income contingent loans (ICR) to current students and collecting repayments from those loans.