Question to the Department for Education:

To ask the Secretary of State for Education, what recent assessment he has made of the sustainability of the student loan system and its effect on the public finances under the current repayment thresholds.

The student loan system in England removes financial barriers for those hoping to study higher education while sharing its costs between learners and the general taxpayer. The loans offer unique protections to borrowers. During and after study, interest rates are capped so that they do not exceed the prevailing market rate for comparable personal loans. After finishing study, monthly repayments are only required when a borrower is earning over the repayment threshold, currently £27,295 per year, or its weekly or monthly equivalent for Plan 2 (post-2012) loans and do not change based on rates or the amount borrowed. Any outstanding debt is written off after the loan term ends at no detriment to the borrower.

As student loan repayments are income contingent, the impact of the repayment threshold and repayment conditions on students with particular protected characteristics depends on the earnings of those borrowers in each year over the loan term. The department publishes annual data on graduate employment and earnings by years after graduation, including by ethnicity, through the Graduate Outcomes publication which can be found here: https://explore-education-statistics.service.gov.uk/find-statistics/graduate-outcomes-leo/2018-19.

Regular assessments of the student finance system, including forecasts of future loan outlay, repayments and the size of the loan book, are made and published annually. The most recent publication can be found here: https://www.gov.uk/government/statistics/student-loan-forecasts-england-2020-to-2021. This publication notes that the Resource Accounting and Budget (RAB) charge the proportion of loan outlay that is expected to not be repaid when future repayments are valued in present terms, was estimated to be 53% for loans issued to full-time undergraduates in the 2020-21 financial year. The interest rate adds to the total amount of repayments received, and for the 2020-21 loans, the department estimates that repayments due to interest reduces the RAB charge by 4 percentage points.

Potential reforms to student loan terms, with the goal of decreasing the public subsidy on student loans while preserving the income-contingent nature of the current system, were modelled as part of the work done by the independent panel which reported to the Review of Post-18 Education and Funding. We are carefully considering a range of options to ensure that student finance continues to deliver value for money for both students and the taxpayer as we continue to consider the recommendations made by the independent panel. The interim conclusion was published on 21 January 2021, and we plan to set out a conclusion to the review in due course.