Students: Loans

Department for Education written question – answered on 7th June 2021.

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Photo of Stephen Morgan Stephen Morgan Shadow Minister (Defence) (Armed Forces and Defence Procurement), Shadow Minister (Defence)

To ask the Secretary of State for Education, what proportion of the Resource Account and Budgeting charge his Department estimates to be made up of the interest accrued on student loans rather than the capital borrowed for tuition and maintenance.

Photo of Michelle Donelan Michelle Donelan Minister of State (Education)

In the 2020-21 financial year, the Resource Accounting and Budget (RAB) charge for full-time Plan 2 loans was estimated to be 54% (https://www.gov.uk/government/statistics/student-loan-forecasts-england-2019-to-2020). This is calculated by forecasting how far future repayments on those loans will fall short of the amount originally lent, when put into present value terms using the HM Treasury discount rate (currently RPI + 0.7%).

The interest charged on student loans adds to the total amount of repayments received. For 2020-21 loans issued, the department estimates that repayments due to interest reduced the RAB charge by 4 percentage points.

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