30 SECOND GUIDE: Student loans

By DAILY MAIL REPORTERS

Updated: 04:31 EST, 26 November 2013

The Daily Mail's City & Finance team explains the sale of student loans from the 1990s to the private sector

What about them?

The Government has just sold a chunk of loans from 1990-98 to a debt management consortium called Erudio.

Who’s behind it?

Firms including CarVal Investors, an arm of the agricultural commodities trader Cargill, and Arrow Global, a debt purchaser.

Student loans: The historic loan book has been sold to a private firm - could this result in interest rates increasing?

Any student protest?

Yes. The National Union of Students says it involves public subsidy of a private company, adding: ‘Selling off the loan book at a discount to secure a cash lump sum now doesn’t make economic sense.’

A discount?

The loans, owed by a quarter of a million borrowers, have a face value of £890million but have been sold for £160million.

Why so cheap?

The loans are stale, with only 14 per cent of borrowers still repaying. Around 46pc are earning below the repayment threshold and 40pc are not paying in accordance with their terms.

Good deal?

For Erudio, probably. For the Government? Perhaps. The private sector has more expertise at ‘maximising returns’ on such loan books.
Sounds ominous.

Terms and rates will stay the same and Erudio will have to stick to strict OFT rules about the treatment of borrowers.

Student loans: The historic loan book has been sold to a private firm - could this result in interest rates increasing?

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