Question

To ask the Secretary of State for Business, Innovation and Skills, what estimate he has made of the likely default rate of the new university maintenance loans; and what provisions he has made to cover that cost.

Student loans are not like a bank loan or credit card. Repayments do not have to made if the borrower’s income is below £21k. There is, therefore, no default rate as such, but a borrower who moves overseas and fails to repay even though they are earning over the threshold is in default.

Maintenance loans are either repaid during the loan term, or written off after 30 years, or if the borrower dies or becomes permanently unable to work as a result of disability. Provision for the cost of future write offs is made in BIS accounts each year. This is known as the RAB charge.