Question to the Department for Education:

To ask Secretary of State for Education, what projection his Department has made of the increased cost of each year of graduate debt write-offs following the changes to the student loans repayment threshold proposed in Table 1.9 of Autumn Budget 2017.

The government has frozen tuition fees for academic year 2018/19 and for financial year 2018-19 has raised both the repayment threshold and the thresholds at which variable interest rates apply to borrowers in repayment.

The repayment threshold will rise from £21,000 to £25,000 for the 2018-19 financial year (from 6 April 2018). Following the threshold change, interest will be charged at RPI for those earning below £25,000 (compared to £21,000 before) and at RPI+3% for those earning above £45,000 (compared to £41,000 before), with interest applied on sliding scale for those earning between those two thresholds.

Changes in write-offs are reflected in the Resource Accounting and Budgeting (RAB) charge, which is the estimated cost to government of borrowing to support the student finance system. It is based on future loan write-offs and interest subsidies in net present value terms. For convenience, we express these costs as a proportion of the initial loan outlay. Following the recent change to the repayment threshold for post-2012 loans we estimate the RAB charge for higher education loans has increased from around 30% to between 40% and 45%.

The cost of the system is a conscious investment in young people. It is the policy subsidy required to make higher and further education widely available, achieving the government’s objectives of increasing the skills in the economy and ensuring access to university for all with the potential to benefit.