Treating Students Fairly: The Economics of Post-School Education Contents

Appendix 6: Letter from Sam Gyimah MP, Minister of State for Universities, Science, Research and Innovation to the Chairman, 3 May 2018

Following Viscount Younger’s letter to you on 29 March 2018, please find enclosed a table showing the Department for Education’s projections for the face value of the higher education student loan book at the start of each financial year up to 2049–50, in real and nominal terms. This includes a table of forecasts for the size of the loan book before and after the loan sale that occurred in 2017. I apologise for the delay in this correspondence.

The forecasts have been produced using the Department’s student loan outlay and repayment models, which forecast future loan outlay, repayments, interest and write-offs to estimate the value of the outstanding student loan book. Student loan outlay is forecast using historical expenditure and projected into the future using the Department’s student number projections, historic continuation rates and OBR inflation estimates, with some adjustments made where future policies have been announced. Student loan repayments are estimated from earning forecasts for a population of loan borrowers, based on earnings of historic loan borrowers and graduates with the same demographic and course characteristics, uprated in line with OBR average earnings growth forecasts. Repayments are then forecast based on these earnings, with adjustments made to allow for voluntary and overseas repayments, and mortality.

I am afraid that it is not currently possible to provide you with forecasts for the size of the remaining loan book after any other future loan sales. The Government has said that it is targeting £12bn of proceeds through a programme of sales over the next five years. However, we have yet to determine which loans will be included in these sales and therefore cannot estimate the yearly value of the student loan book after these sales have taken place.

I am placing a copy of this letter in the House Libraries.

Forecast opening value of English higher education income contingent student loan book, in nominal and real terms: 2018/19 to 2049/50

Value including sold loans

Value excluding loans sold in 2017

Financial year

Nominal terms (£bn)

Real terms, 2018–19 values (£bn)

Nominal terms (£bn)

Real terms, 2018–19 values (£bn)

2018/19

103.6

103.6

100.6

100.6

2019/20

121.7

118.1

118.9

115.4

2020/21

141.7

133.5

139.0

131.0

2021/22

162.6

148.9

160.2

146.7

2022/23

184.6

164.2

182.3

162.2

2023/24

207.7

179.4

205.5

177.5

2024/25

232.2

194.5

230.2

192.8

2025/26

258.5

209.8

256.5

208.3

2026/27

286.6

225.5

284.7

224.0

2027/28

316.3

241.3

314.6

239.9

2028/29

347.6

256.9

345.9

255.7

2029/30

380.4

272.5

378.8

271.3

2030/31

414.9

288.0

413.4

287.0

2031/32

451.0

303.4

449.6

302.4

2032/33

488.3

318.3

486.9

317.4

2033/34

526.6

332.7

525.4

331.9

2034/35

566.0

346.6

564.8

345.8

2035/36

606.3

359.8

605.2

359.1

2036/37

647.0

372.1

645.9

371.5

2037/38

688.5

383.9

687.5

383.3

2038/39

731.2

395.2

730.3

394.7

2039/40

774.9

406.2

774.0

405.7

2040/41

819.5

417.0

818.6

416.6

2041/42

865.9

427.8

865.1

427.4

2042/43

913.7

438.3

912.9

437.9

2043/44

962.5

448.3

961.8

447.9

2044/45

1,012.5

457.8

1,011.8

457.5

2045/46

1,063.6

466.9

1,063.1

466.7

2046/47

1,106.2

471.5

1,105.8

471.3

2047/48

1,147.1

474.7

1,146.9

474.6

2048/49

1,181.6

474.7

1,181.5

474.7

2049/50

1,212.7

473.0

1,212.7

473.0

Source: DFE student loan outlay and repayment models

Notes

Includes all income contingent undergraduate and postgraduate higher education loans.

The values shown are forecasts for the total face value of the student loan book at the start of each financial year in April.

Values in 2018/19 prices have been calculated using forecasts for RPI from the Office for Budget Responsibility (OBR) March 2018 Economic and Fiscal Outlook

This assumes that in the long run, future average loan outlay increases in line with OBR forecasts for RPIX and student numbers vary in line with ONS principal population projections (weighted to the age profile of new students)

Loan repayments are estimated from earning forecasts for a population of loan borrowers, based on earnings of historic loan borrowers and graduates with the same demographic and course characteristics, uprated in line with OBR average earnings growth forecasts

Future students are assumed to have the same distribution of characteristics and loan amounts as the most recent year of student loan borrowers

Forecasts are based on current policies and policy changes that have already been announced.





© Parliamentary copyright 2018