Income Contingent Student Loan Scheme

HL Deb 29 October 2003 vol 654 cc48-9WA

Baroness Sharp of Guildford

asked Her Majesty's Government:

What estimates are included in the public accounts in relation to the annual cost of servicing the debt outstanding on the income contingent student loan scheme; and how those costs are calculated. [HL5073]

Baroness Ashton of Upholland

Accounting for the cost of servicing the student loan debt was prescribed by the Financial Reporting Advisory Board in its paperResource Accounting Treatment of Student Loans—FRAB 30(3). The cost of servicing the debt is made up of three elements. The formulas for calculating each of these costs are as follows:

COST OF CAPITAL: Average outstanding balance of loans multiplied by the HMT cost of capital rate.

INFLATION ADJUSTMENT: (Opening loans balance plus provisions opening balance) multiplied by (headline line rate of inflation minus cost of capital).

UNWINDING THE DISCOUNT: Opening balance on provisions multiplied by the headline rate of inflation.

The costs relating to income contingent loans included in the resource accounts are as follows:

Financial Year	Cost of Capital £000	Inflation Adjustment £000	Unwinding the Discount £000	Total £000
1998–99	9,114	—	—	9,114
1999–2000	41,502	4,362	8,870	54,735
2000–01	101,873	23,211	39,669	164,753
2001–02	182,699	55,132	88,097	325,929
Total	335,188	82,705	136,636	554,529