I have been asked to reply.
We are at the early stages of implementing the Budget announcement to sell income-contingent student loans. Further details will be announced in due course. Meanwhile we are confident that the Government will obtain good value for money, as it is obliged to do by rules of Government accounting.
In 1998, the Government received £1 billion for the sale of student loans with a face value of £1.02 billion. In 1999, the Government received £1 billion for the sale of student loans with a face value of £1.03 billion. These are figures for the UK as a whole, as loans administration had not then been devolved.
Over the lifetime of the loans, the total gross payments of interest and other subsidies to the debt owners, in respect of loans made to English and Welsh domiciled students, is estimated at £635 million in 1998/99 net present value (NPV) terms. After deducting the interest subsidy costs, which the Government would still have incurred if the loans had not been sold, the estimated net lifetime costs of the sale for interest and other subsidies are £125 million in 1998/99 NPV terms. This assumes the current relevant Treasury discount rate of 3.5 per cent.
The discount rate at the time of the sales was 6.0 per cent. Using this rate would have resulted in future cash flows having lesser value, which would have made the sales more attractive to the Government. The estimated total gross payments of interest and other subsidies would have been £545 million, with a net estimated lifetime saving of £130 million. The actual final cost/saving will depend on the performance of the sold loans over their remaining life.
Note:
All figures are quoted in respect of England and Wales unless otherwise stated.