Government restarts privatisation of £12 billion student loan book

The starting pistol has been fired on the privatisation of the student loan book, with the Government vowing to sell it off for £12 billion by 2021.

The move will begin with the sale of the 2002/06 loan book, which had a face value of £4 billion at the end of the 2014/15 financial year.

However, a string of factors - including the likelihood that some student loans will not be repaid in full - means the money recouped from the sale will be lower than the face value.

Plans to privatise the vast debt pile were previously called off by then Business Secretary Vince Cable in 2014, after deciding that it would not reduce public sector debt by as much as originally thought.

A Department for Education (DfE) spokeswoman said on Monday that an initial value for money assessment has been carried out and that now was a good time to restart the sale.

The Government insisted that the move will not impact on former students who hold the loans, with controls put in place to ensure that terms are not changed.

Borrowers will still deal with the HMRC and Student Loans company, a spokeswoman said.

Chief Secretary to the Treasury David Gauke said: "The Autumn Statement reaffirmed our commitment to the sale of the student loan book if market conditions were favourable and I'm pleased the timing is now right to start the process. This sale makes sense for taxpayers and will play an important contribution in our work to repair the public finances."

Former chancellor George Osborne said in 2013, when the sell-off was first put forward, that the proceeds would help fund more students studying for a degree, as well as control public sector debt.

UK Government Investments has begun searching for buyers to snap up the pre-2012 English student loan book through a series of sales before the end of the 2020/21 financial year.

Chancellor Philip Hammond is searching for ways to shore up the public finances in the face of ballooning public sector debt, which reached 86.2% of gross domestic product in December.

Sale of the student loan book would be structured through a securitisation to attract an array of different investor groups, including pension funds, insurers and asset managers.

It is expected to take several months to complete and would depend on "market conditions", the Government added.