Has the United Kingdom sold their student debt?

Parliament house flag post

Has the United Kingdom sold their student debt?

Posted 30/10/2013 by Coral Dow

On a recent Q&A program Education Minister Christopher Pyne, in response to a question about selling HECS debt, stated: ‘Britain have sold their HECS debt as an asset and we should investigate whether that is a sensible move for us to do so.’ This Flag Post looks at the UK experience of selling some of their student loan; of a 2007 proposal to sell more that did not proceed and of recent proposals to again sell part of their student debt asset.

Pre 1998 debt
The UK Labour Government introduced an income contingent student loan scheme similar to Australia’s HECS HELP programme in 1998. The student loan scheme that had existed since 1990 was a loan with fixed rate repayments over five years in 60 equal monthly instalments repayable from the April after graduation or when their gross income exceeded the threshold of 85 per cent of national average earnings. These loans were called Mortgage Style Loans.

In 1998 the UK Government announced a sell off the Mortgage Style Loans and the Education (Student Loans) Act was amended to facilitate the sale. The amendments enabled the Government to make subsidy payments to the purchaser and to prevent existing loan conditions being changed by the purchaser.

Two sales of the student loan debt of £1 billion each were made in 1998 and 1999.

A House of Commons Library Research paper concluded:

The Government received £1 billion for each of the two sales of the student loan portfolio. The face value of the loans sold was £1.02 billion and £1.03 billion in 1998 and 1999 respectively. As the interest rate of student loans was below market level the Government paid a subsidy [£350 million in 1998 and £395 million in 1999] to the purchasers to reflect this and make the sale attractive to the private sector. The difference between this and the cost that the Government would have incurred by holding on to the loans was the net cost of the sell off. The Government benefited by the transfer of risk to the private sector.
At present this is the only student debt that has been sold. 

2007 proposal
In June 2007 total student loan debt for England was £18.1 billion. In the UK’s 2007 Budget the Government announced plans to sell £6 billion of the debt over the period 2008-11.

When the Sale of Student Loans Bill 2007 was introduced the Government expected the loan sale programme to proceed indefinitely and extend to loans that are made in the future as well as those already on the loan book. It also expected that ‘transactions will only proceed if they represent good value for money and include a genuine transfer of risk to the private sector; terms and conditions for individual borrowers will stay the same and Government will retain control of all loan arrangements and regulations, including interest rates and repayment thresholds’.

In June 2009 the Minister of State, Department for Innovation, Universities and Skills, Lord Drayson, told the Parliament that market conditions did not allow sales to make a good return for the taxpayer and they would look for sale opportunities when market conditions improved. 

No sales were made.

2013 proposal
In March 2013 the UK Government announced it would sell off the last of the pre 1998 Mortgage Style Loans. In the media release it stated ‘The remaining loans owned by the government are mostly either in deferment or in arrears, so total annual repayments are low. The loans to be offered for sale have a face value of around £900 million but, the market value will likely be significantly lower’.

In relation to Income Contingent Loans Danny Alexander, the chief secretary to the Treasury, told the House of Commons in a speech on infrastructure spending in June 2013:

We will take action to sell off £15 billion worth of public assets by 2020. £10 billion of that money will come from corporate and financial assets like the student loan book. And the other £5 billion will come from land and property.

No details are yet available but media discussion, in the Guardian and New Statesman based on a Rothschild Investment Bank report commissioned by the Government and obtained under FOI suggests that conditions for a successful sale would have to provide incentives to the purchaser, such as the ability to change the borrowers’ conditions, which were not permitted under the 2007 legislation.

The UK student loan debt is estimated at £40 billion. To date only £2 billion has been sold.


  • 21/01/2014 1:39 PM
    Carol Ey said:

    The House of Commons Library research paper does provide some information on repayment rates. We are not aware of any evidence of a change in rate following the sale, but the loan conditions did not change so it is probable that repayment rates were not affected.

  • 21/01/2014 1:39 PM
    Martin Butterfield said:

    Is it known what the payback rate was for the sold loans? If so, how does that compare with the rate when the Government owns the asset.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration Parliament climate change Australian foreign policy elections social security women welfare reform Australian Defence Force welfare policy school education higher education private health insurance Taxation Indigenous Australians health financing emissions trading Australian Bureau of Statistics employment people trafficking statistics Middle East illicit drugs gambling health reform federal election 2010 Senate income management Medicare disability Sport United Nations Asia transport Australian Public Service politics criminal law Afghanistan health forced labour aid Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Industrial Relations Carbon Pricing Mechanism dental health public service reform OECD constitution Australian Electoral Commission WADA child protection environment poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system Electoral reform accountability defence capability multiculturalism ASADA Law Enforcement Australian Federal Police Fair Work Act governance labour force people smuggling debt international relations New Zealand food Australian Crime Commission pharmaceutical benefits scheme voting China regulation leadership Census election results UK Parliament Papua New Guinea banking International Women's Day corruption pensions children's health Aviation federal election 2013 foreign debt gross debt net debt parliamentary procedure Senators and Members ALP Newstart Parenting Payment Youth Allowance sea farers vocational education and training domestic violence military history by-election political parties High Court skilled migration mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations youth paid parental leave same sex relationships coal seam gas customs planning doping crime health risks Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy Productivity United Kingdom firearms public policy Population violence against women ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining employer employee renewable energy regional unemployment fishing European Union family assistance United Nations Security Council Australian economy forestry food labelling Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion human rights paternalism administrative law universities TAFE Ireland election timetable citizenship asylum seekers early childhood education Canada Financial sector national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing water health policy Governor-General US economy trade unions export liquefied natural gas foreign bribery question time speaker superannuation public housing expertise climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution Double dissolution Senators safety vehicles Foreign affairs ODA MYEFO Pathology tertiary education Taiwan Xi Ma meeting family violence government financial advisers financial planners Financial System Inquiry Murray Inquiry China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament Defence High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers sitting days First speech defence budget submarines workers Somalia GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top