Student Loan Repayments the Facts and the Fiction

#AceNewsServices says this is a follow-up to my previous post at NAO

Press Release:

Full report: Student loan repayments

Student Loans the Fact and the FictionUntil the Department for Business, Innovation and Skills (BIS) has a robust strategy for maximizing the collection performance of student loans and improves its information on borrowers, it will not be well-placed to secure value for money, according to today’s report from the National Audit Office.

BIS forecasts that the total value of outstanding student loans will increase from £46 billion in 2013 to approximately £200 billion by 2042, in 2013 prices. The number of borrowers due to repay is projected to increase from 3 million in 2012-13 to 6.5 million by 2042. The loan book is therefore becoming a substantial public asset.

BIS and its collection partners HM Revenue & Customs and the Student Loans Company (SLC) work together in a joined-up way. In 2012-13, they collected £1.4 billion in student loan repayments, at a cost of £27m. While using the existing tax system brings clear benefits for efficient collection from borrowers who work and pay tax in the UK, BIS nevertheless needs to make better use of data to support  its collection strategy and improve its understanding of where it could invest to maximise the collection value of the loan book.

In designing how student loans would work, BIS anticipated that a proportion of the loans would not be repaid. However, BIS has not set an annual target for the amount to be collected because repayments are affected by graduate earnings and economic factors outside its direct control. It does not separately publish its forecasts for the amounts it expects to be collected and has had difficulty developing an accurate forecasting model. Annual repayment forecasts are consistently higher than amounts collected and BIS cannot explain why forecast repayments are currently around 8 per cent higher in value than actual repayments.

Furthermore, it has not done enough to establish whether borrowers with no current employment record are earning enough to repay their loans. While many of these borrowers may not be in employment, BIS and the SLC have carried out little analysis to establish how many may be working overseas or the level of repayments that may be missed. They need to improve their information on borrowers to make more informed judgements about where to invest to maximize recovery.

Book Debt Sell Off“Given the expanding size of the student loan book, the Department for Business, Innovation and Skills now needs to take a more energetic and considered approach to maximizing the value of the loan book to the taxpayer and achieving a high level of collection performance.”

Amyas Morse, head of the National Audit Office, 28 November 2013

Notes for Readers:


Total value of outstanding student loans, March 2013.


Total student loans paid out since scheme introduction in 1990.


The proportion of new loans BIS does not expect to be repaid.

£200 billion

Projected value of outstanding student loans by 2042.


Earnings threshold for new loans above which borrowers begin  repaying.

£1.4 billion

Total repayments collected in 2012-13.

£27 million

Total spent by the Student Loans Company and HM Revenue & Customs on maintaining and collecting repayments in 2012-13.

82 per cent

Proportion of repayments collected through the UK tax system in 2012-13 (the rest is collected by the Student Loans Company).

50 per cent

Estimated proportion of borrowers with new student loans who will not fully repay.

8 per cent

Gap between forecast and actual repayments collected, 2011-12.

1. The government introduced student loans in 1990 to support students, primarily for living costs but subsequently extended to include tuition fees. The Department for Business, Innovation & Skills (BIS) is responsible for ensuring that there is an effective and efficient system for collecting student loan repayments from English borrowers and from EU borrowers attending English universities. The Student Loans Company (SLC) and HM Revenue & Customs (HMRC) operate the system for collecting loan repayments.

2. Press notices and reports are available from the date of publication on the NAO website, which is at Hard copies can be obtained from The Stationery Office on 0845 702 3474.

3. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of almost £1.2 billion in 2012.

28 November 2013


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