Students: Loans

Department for Education written question – answered at on 24 May 2024.

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Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

To ask the Secretary of State for Education, for what reasons the discount rate used to calculate the Resource Accounting and Budgeting charge on student loans is different to the rate used for general policy appraisal.

Photo of Damian Hinds Damian Hinds Minister of State (Education)

The Resource Accounting Budget charge, which is the government subsidy anticipated on student loans issued in any particular financial year, is calculated as the present value of student loan outlay less expected future repayments, in accordance with relevant International Financial Reporting Standards and guidance from HMT’s Government Financial Reporting Manual (FReM).

The FReM requires future repayments of student loans to be discounted at the higher of the intrinsic rate of the financial instrument and the real financial instrument discount rate set by HMT, based on analysis of real yields on UK index linked gilts and are specifically appropriate to central government.

The FReM is kept under constant review. It is updated to reflect developments in relevant standards and best practice.

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