MINISTERS consistently over estimate the amount students will repay of their loans, according to a new report from the Public Accounts Committee (PAC) out today.
As a result, the amount of debt left on government books is being underestimated and could pose a risk if calculations are not improved.
There is currently around £46bn worth of student loan debt outstanding. That figure is set to rise when £9,000 a year fees are introduced and the committee believes it will hit £200bn by 2042. Government estimates suggest that around 40 per cent of debt will never be repaid, that amounts to £18bn.
Chair of the PAC Margaret Hodge is calling for ministers in the
"The government intends a further sale of the loan book to finance the increase in student numbers it promised, so any sale must represent value for money," Hodge said.
She added: "The reality is that the department lacks a robust model to estimate the value of the loans properly." Hodge called on the government to better assess the value of the student loan book ahead of a potential further sale.
Ministers sold a portion of the debt in November last year. It was paid £160m by a debt management consortium for £890m worth of ageing debt. "The approach to collecting debts just isn't tough enough," Hodge said, adding that the department must do more to locate graduates who have "slipped out of contact" and stopped repayments.
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