Today, I can confirm that the Government are resuming the process required to sell part of the “plan 1” (i.e. pre-2012) English student loan book as previously announced to the House on 6 February 2017. The sale covers loans issued by English local authorities only under the previous (pre-2012) system, specifically those which entered repayment between 2002 and 2006, with a total face value of around £3.7 billion. This is the first sale of the Income Contingent Repayment (ICR) loan book and it is proceeding on the basis that there is a reasonable prospect of achieving value for money. It will only complete subject to market conditions and a final value for money assessment.
As the Government have previously made clear, the position of all graduates, including those whose loans are part of a sale, will not change as a result of the sale. A sale will not alter the mechanisms and terms of repayment and sold loans will continue to be serviced by Her Majesty’s Revenue and Customs (HMRC) and the Student Loans Company (SLC) on the same basis as equivalent unsold loans. These protections mean that purchasers will have no right to change any of the current loan arrangements or to directly contact borrowers. Government have no plans to change, or to consider changing, the terms of pre-2012 loans.
The sale terms are expected to include a number of warranties and indemnities for sale arrangers and investors, which give rise to contingent liabilities for Government. In this case, although there is specific statutory authority for the liability under the Sale of Student Loans Act 2008, in line with HM Treasury rules I believe it is appropriate to notify Parliament before incurring these liabilities. As a matter of record I have placed a Departmental Minute in the Libraries of both Houses describing the contingent liabilities that the Department for Education will hold on behalf of Government as a result of this first sale of the pre-2012 English student loan book. The maximum contingent liability against the Department for Education is unquantifiable and is expected to be in place for as long as there are outstanding securities.
The House will also be informed if and when a sale is completed.