Government Loan Sale

£890 million worth of loans taken out by students between 1990-1998 have been sold to Erudio Student Loans, a debt management consortium, for £160m.

The sale, confirmed by ministers last month, sold off unpaid mortgage-style student loans owed by approximately 250,000 borrowers. The deal only applies to the remaining 17 per cent of these so-called mortgage-style student loans, in which students repaid their debt in fixed monthly instalments over a set period.

David Willetts, MP and Minister of State for Universities and Science, reassured graduates by stating that they have “no reason to be concerned” and that “borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans”.

The initiative to sell old-style debts was first proposed by Mr. Willetts in March, in the belief that “the sale of the remaining mortgage-style student loan book represents good value for money, helping to reduce public sector net debt by £160m”.

Mr. Willetts also stressed that “the sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans”, at a time when the number of students taking out loans to cover fees is constantly increasing.

This is not an unusual sale, as previous governments have also been known to sell off old student loans which are not being repaid. In its 2013-2014 business plan, the Student Loans Company explained that these loans are “are a closed portfolio of ageing debts that are becoming harder to collect with time”.

Of the approximately 250,000 loans sold to Erudio, only 14 per cent are repaying their debt. 46% of borrowers are not earning enough to start repaying and 40% are not paying in accordance with the terms and conditions of their loans.

With regards to the future, Mr. Willetts affirmed that “no final decision has been taken” concerning whether old loans will continue to be sold off.