The British government has sold student loans with a face value of £890m for just £160m to a private debt purchaser renowned for its persistent debt recovery practices.
The Department for Business, Innovation and Skills (BIS) announced the sale, which covers loans to around 250,000 students who started courses between 1990 and 1998, to a consortium named Erudio Student Loans.
The price paid by Erudio reflects their assessment of the proportion of loans likely to be paid back in full or in part, with the majority of the book in arrears or deferred.
The consortium is led by investment fund manager CarVal Investors and debt purchasing group Arrow Global.
Following this decision, George Osborne announced in his autumn statement that “new loans will be financed by selling the student loan book”.
A spokesperson from BIS confirmed to the Independent that student loans taken out between 1998 and 2012 have “the potential” to be sold “over the next five years”.
If privatised, the sale of the loan book would deliver roughly £10-15 billion to the government over a five-year period, although any future repayments of capital and interest from the loans sold would be lost.
In both instances, BIS have claimed that there will be no change to borrowers’ terms and conditions, including to the interest rates charged.
But Michael Chessum, the University of London Union president, argued students should not be reassured by the government’s promises.
He said: “There is every reason to believe that current and future governments will simply flout commitments on higher education funding, because that is what has happened consistently under both Labour and Tory governments”.
Adrian Polglase, London Student: Issue 5 (09/12/2013)
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