Student loan repayment income potentially undervalued by £600m

The National Audit Office’s (NAO) have warned that more than £600 million may have been overlooked in the government’s analysis of future loan repayments.

The NAO’s estimation on last year’s loan sales has revealed a disparity between the Treasury’s and the Department for Education’s calculations regarding repayment rates. The watchdog has warned the government to take a “comprehensive view” of their finances and consider whether the future sale of loans will negatively impact the government.

The NAO declared that “While HM Treasury uses one method to support its decision to sell student loans, the [DfE] uses another method to calculate the cost of student loans when they are added to the government’s balance sheet.

“This reduces transparency and risks government not knowing the ultimate value and cost to the taxpayer of student loans when they are issue, and of selling assets too cheaply.”

While the first batch of student loans had been sold at the upper estimated cost, the watchdog has called for a better examination of whether the selling of student loans provides value for money to taxpayers.

A government spokesperson has responded to NAO’s allegations by highlighting the pre-2012 government’s success of selling student loans while raising 1.7 billion.

“Student loans are designed so that borrowers only repay when they can afford to – this gives more people the chance to go to university and get on in life, but also means many students will never fully pay back their loans,” said the government spokesperson.

However, last week, the Office for Budget Responsibility (OBR) has reinforced the NAO’s report as it criticised the government’s income-contingent repayment system of student loans. The OBR declared that the costs of funding higher education have been underestimated by the government.

Student loan debt in the UK has jumped to more than £100bn and is expected to grow to £470bn by 2049.