Bev Budsworth, MD of The Debt Advisor Ltd was asked by Radio 5 Live to research and discuss the recent sale of Student Loans to Erudio Student Loans. We are pleased to share her teams research on the subject.
The Student Loans Company was originally set-up in 1989 as a government-owned organisation. In 1990, fixed term student loans were introduced, known as Mortgage Style Loans, before later being replaced by Income Contingent Loans in 1998. The repayment of a Mortgage Style Loan depends on the number of loans obtained:
- If four or fewer loans were obtained, repayment would be over a period of 60 months;
- If five or more loans were obtained, repayment would be over a period of 84 months.
Calculation of the monthly repayments is based upon the total amount borrowed plus interest (upon the rate of inflation), divided by the total number of monthly repayments.
There are certain circumstances under which Mortgage Style Loans may be cancelled, as follows:
- You were under the age of 40 when the last student loan was obtained and reaches the age of 50;
- You were over the age of 40 when the last student loan was obtained and reaches the age of 60;
- The last student loan was agreed more than 25 years ago;
- You are permanently disabled or deemed unfit to work, and can provide evidence to verify that you are in receipt of disability related benefit;
- A student or former student has died, subject to receipt of evidence, i.e. the death certificate or coroner’s report.
Student loans are no longer included for proving within bankruptcy and Individual Voluntary Arrangements (IVAs). All student loans, specifically known as Mortgage Style Loans, have been excluded from bankruptcy where the bankruptcy order was made on or after 1 July 2004. In terms of IVAs, the exclusion of student loan liabilities was effective where the IVA was approved on or after 6 April 2010.
Earlier this year, a project was launched for the sale of student loans obtained between 1990 and 1998, i.e. Mortgage Style Loans. There had been two previous sales in 1998 and 1999; the remaining accounts held with the Student Loans Company are those that are either in deferment or arrears.
On 25 November 2013, the Student Loans Company announced that they intended to sell the remaining Mortgage Style Loans. Earlier today 25 November 2013, The Student Loans Company confirmed these loans have been sold to Erudio Student Loans. Furthermore, that the loan balances and interest rates will not change as a result of the sale; and that if a student loan is currently being repaid, the repayment plan will also remain the same.
It has been estimated that of the 250,000 loans sold, worth circa £900 million: around 46% of people’s incomes are below the repayment threshold; 14% of people are still repaying their liability; and 40% of people are not repaying their loans according to the required terms.