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Sale of Student Loans Bill

The best, most effective protocols possible will apply to both Government owned debt and privately owned debt. There will be no distinction and no difference in the way in which these matters are treated between the public and private sectors. The idea of selling student loans is not new. The Government have successfully sold tranches of student loans in the past. In 1998 and 1999 there were two sales of the old ““mortgage-style”” student loans for a total of around £2 billion. The Government believe that there will be an appetite for these assets in the marketplace in respect of the Bill, not only because of the previous sales, but because of the distinctive characteristics that make student loans an attractive purchase. The loans would provide an investor with access to a new instrument with unique characteristics, allowing them further to diversify their portfolio, and a sustained income over a long period from a group of borrowers who, when taken as a whole, are considered relatively low-risk. Those features make the student loans an attractive candidate for purchase by a wide range of potential investors. All transactions will be subject to a rigorous assessment that we are achieving good value for money. In making that assessment, the Government will examine the prevailing market conditions and ensure that a competitive market for the loans has been generated. The Government will also provide the market with full information about the loan book in order that the assets can be efficiently valued. The Government will ensure that there has been a genuine transfer of risk from the public accounts to the private sector. The Government will assess the proceeds that look likely to be achieved in the transaction using full and clear market information and a comparison with keeping the loans on their books, in terms of both likely income flows and levels of risk. As with the previous loan sales, the Government will draw on specialist advice from within Departments and from appropriate external sources. We will draw on NAO guidance in our approach to assessing value for money, and these judgments will of course rightly be subject to scrutiny by the NAO in due course. Making a sound judgment about the timing and pricing of sales is particularly important given the recent turbulence in world credit and financial markets. It is not possible to predict the potential market conditions in the future, and the market conditions will naturally vary for different sales in a long-term programme, which is what we are talking about. Our intention is that portions of the loan book would be sold at regular intervals as part of an ongoing programme, and we will closely monitor the market so that sales can be made at the right time. Decisions will, rightly, always be informed by what provides the best value for money for the taxpayer. The 1998 legislation, which enabled the previous sales, has been repealed, and so cannot be amended to enable sales of income contingent loans. We are therefore introducing this Sale of Student Loans Bill, which will allow sales to take place while protecting the interests of all borrowers regardless of whether their loan is sold or retained. I give borrowers this reassurance: purchasers of loans will not be able to charge a different rate of interest; they will not be able to change the income threshold for repayments; and they will not be able to use a borrower’s personal details for any purpose beyond that which is required for management of the loans.