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Student loans sold to debt company

Student loans sold to debt company
The portfolio of loans taken out by students in the 1990s has been to a private debt collection agency


Published: 12:28am, 25th November 2013
Updated: 12:06am, 26th November 2013

Nearly £900 million of student loans were sold off today as part of Government efforts to balance the nation's books.

The loans, which were taken out by students who began courses between 1990 and 1998, have been sold to a debt management consortium for £160 million.

Universities Minister David Willetts said the private sector was best placed to collect the outstanding debt, allowing the Student Loans Company (SLC) to concentrate on administering newer loans.

Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms.

The project to find a buyer for the remaining mortgage-style loans was launched earlier this year, when Mr Willetts said the plan would "maximise the value of one of the Government's assets".

The mortgage-style loans have a face value of around £890 million but the market value is significantly lower.

The SLC will continue to manage the loan book until it is transferred to Erudio Student Loans in a few months' time. Erudio is backed by a consortium led by CarVal Investors and Arrow Global, a consumer debt management firm.

There will be no change to borrowers' terms and conditions, including the calculation of interest rates for loans.

Mr Willetts said: " The sale of the remaining mortgage-style student loan book represents good value for money, helping to reduce public sector net debt by £160 million. The private sector is well-placed to maximise returns from the book, which has a deteriorating value.

"The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans."

Borrowers who took out Income Contingent Repayment loans after 1998 are not affected by the sale. They will continue to be managed by the SLC, although the Government is exploring options for the sale of this loan book.

There were two previous sales of mortgage-style loans in 1998 and 1999 which passed £2 billion of the loans to the private sector.

NUS president Toni Pearce said it was " extremely concerning" that the public will be subsidising a private company to make a profit from public debt.

She added: "The impact of this sale won't only affect borrowers, but will affect everybody. The simple fact is that having these loans on the public books would be better off for the Government in the long run. Selling off the loan book at a discount to secure a cash lump sum now doesn't make economic sense."

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