HC Deb 24 February 2004 vol 418 cc407-9W
Chris Grayling

To ask the Secretary of State for Education and Skills what estimate he has made of the number of graduates in receipt of income contingent student loans who will take career breaks to bring up children; and what assumptions about the consequent subsidy costs have been included in the Government's overall estimates for student loan subsidy provisions. [155374]

Alan Johnson

Our estimates of the cost of subsidising both maintenance and fee loans in 2006–07 terms were published in the Regulatory Impact Assessment associated with the HE Bill. The economic cost of providing student loans is made up of the interest rate subsidy on loans together with the cost of any loans that are never repaid (e.g. due to death, permanent disability or loans being written off after 25 years). Modelling this cost requires taking into account a great number of factors. Important factors include:

  1. The number of students in Higher Education;
  2. The parental income of those students (or their own income if independent);
  3. The proportions of students studying in London, at home or elsewhere;
  4. The propensity of students to take out each loan;
  5. The distribution of fees actually charged by Higher Education institutions from 2006–7;
  6. The distribution of lengths of courses (based on internal modelling):
  7. The pattern of withdrawals from HE courses (based on internal modelling);
  8. The earnings profiles of graduates; and
  9. Macroeconomic conditions.

In relation to factor (vii), the modelling of the cost of providing student loans uses Labour Force Survey (LFS) data to inform the probability of borrowers being in employment, unemployment, or economically inactive. We have used the LFS data to take account of those people who take career breaks-to raise children or for other reasons. The impact of those who take career breaks to raise children is thus reflected in the modelling but it is not possible to estimate how many borrowers will take career breaks for this reason—or to estimate the cost associated with this factor—in isolation.

Chris Grayling

To ask the Secretary of State for Education and Skills what financial assumptions were made in calculating the provision of £25 million to cover the cost of writing off outstanding student loans after 25 years. [155375]

Alan Johnson

Our estimates of the cost of subsidising both maintenance and fee loans in 2006–07 terms were published in the Regulatory Impact Assessment associated with the HE Bill. The economic cost of providing student loans is made up of the interest rate subsidy on loans together with the cost of any loans that are never repaid (e.g. due to death, permanent disability or loans being written-off after 25 years). Modelling this cost requires taking into account a great number of factors. Important factors include:

  1. The number of students in Higher Education;
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  2. The parental income of those students (or their own income if independent);
  3. The proportions of students studying in London, at home or elsewhere;
  4. The propensity of students to take out each loan;
  5. The distribution of fees actually charged by Higher Education institutions from 2006–7;
  6. The distribution of lengths of courses (based on internal modelling);
  7. The pattern of withdrawals from HE courses (based on internal modelling);
  8. The earnings profiles of graduates; and
  9. Macroeconomic conditions.

The Regulatory Impact Assessment estimated the cost of writing-off loans at 25 years at £30 million. This is the extra economic cost of not collecting any repayments that would have been made on loans older than 25 years.