To ask the Secretary of State for Education and Skills for what reasons the Student Loans Company uses the retail price index as its preferred inflation index. (134375)

[holding answer 27 April 2007]: The Government's policy is to apply an interest rate to student loans which maintains the value of the loan in real terms. Borrowers therefore receive an appreciable interest rate subsidy compared to commercial loans. The retail price index is used as the interest rate because it reflects a range of relevant factors including mortgage interest and council tax.

To ask the Secretary of State for Education and Skills how long transfers of student loan repayments from the Treasury’s consolidated account remain with his Department before being transferred to the Student Loans Company. (132897)

[holding answer 20 April 2007]: Student loans repayments are not transferred to the Student Loans Company. They reduce the net assets, representing outstanding loans, on the Department for Education and Skills balance sheet. It is only information about repayments made by individual borrowers that is passed to the company to allow it to issue annual statements. Once that information is received by the company, repayments are attributed to each month of the tax year in which they were made by the borrower and monthly interest is calculated accordingly. This ensures that even if there is a delay in repayment details reaching the company, the borrower does not pay any additional interest.

To ask the Secretary of State for Education and Skills how much of the student loan repayment transfers received by his Department from the Treasury’s consolidated account in each of the last four quarters was (a) repayment of the principal component and (b) interest accrued. (132898)

[holding answer 20 April 2007]: The Student Loans Company updates accounts with repayment details as they are received from HM Revenue and Customs. Repayments are taken from the total balance owed by the borrower. The Student Loans Company does not break down either outstanding amounts or repayments into principal and interest components.

To ask the Secretary of State for Education and Skills (1) how much interest his Department earned on student loan repayments collected before annual transfer to the accounts in each of the last five years for which records are available; (131618)

I am aware that there is a petition on the No. 10 website based on the mistaken premise that borrowers overpay interest on their student loans because the Student Loans Company (SLC) only credits repayments annually. I have received correspondence relating to this.

Although borrowers' accounts are only updated as an annual exercise, the total annual repayment received from each borrower is credited to their account as 12 equal monthly payments, and the interest is calculated on a daily basis on the remaining balance in that month. No borrower pays too much interest as a result of the time lag in updating their account, and nor does the Department gain any additional income.