Member Article

Government sells student loans portfolio for £160 million

The outstanding student loans of around a quarter of a million borrowers have been sold to a private company for £160 million, the Government have announced.

London-based Erudio Student Loans will take control of the 17% of mortgage style (MS) loans taken out by students who began courses between 1990 and 1998.

The names of borrowers will be transferred to Erudio in a few months time, and until then the Student Loans Company will continue to manage the book.

Universities and Science Minister David Willetts said: “The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160 million. The private sector is well placed to maximise returns from the book which has a deteriorating value.

“The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans. Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans.”

Erudio Student Loans is backed by a consortium led by CarVal Investors and Arrow Global Limited who are experts in consumer debt management.

There were two previous sales of MS loans in 1998 and 1999 which passed £2 billion of the loans to the private sector. Approximately one million borrowers were retained by the SLC following the previous sales and 69 per cent of those have fully repaid their debt. The Government has already received £2.9 billion of repayments.

Of the loans sold, approximately 46% are earning below the repayment threshold; 14% of borrowers are still repaying and 40 per cent are not repaying their loans in accordance with their terms.

Speaking on behalf of Erudio Student Loans, Stuart Lammin, managing director of CarVal Investors said: “CarVal Investors, along with Arrow Global, is pleased to finalise the acquisition of student loans from the Student Loans Company and the government.

“We look forward to working with Erudio Student Loans to service these accounts given the consortium’s long-term experience in education finance and track record for delivering a high level of service to its customers.”

Erudio Student Loans will have to adhere to strict Office of Fair Trading (OFT) guidance about the treatment of borrowers which includes particular protections for vulnerable borrowers and those in financial difficulty. They have also committed to adhering to best-practice guidance issued by the Credit Services Association.

Borrowers who have taken out Income Contingent Repayment (ICR) loans after 1998 will not be affected by this sale. These accounts will continue to be managed by the SLC. The Government is in the process of exploring options for the potential future sale of the ICR loan book.

This was posted in Bdaily's Members' News section by Tom Keighley .