Abandoning sale of student loan book could leave £12 billion debt gap

The Times reports that Vince Cable’s decision to not go ahead with selling off the student loan book could leave a gap of £12 billion in the Treasury’s finances in the next five years, while also jeopardising George Osborne’s decision to abolish the cap on the numbers of those going to university.

Although no official decision on the student loan book has yet been made, Vince Cable has come out against it, following the privatisation of Royal Mail which was undervalued by £1 billion and the abandoning of plans to sell the Land Registry.

The news comes after the House of Commons Business, Innovation and Skills Select Committee raised doubts over the benefits of selling the student loan book, as Government analysis predicted revenues of £2 billion by the sale, as opposed to initial expectations of £12 billion.

The Committee also found that the current student loan system might not be financially viable, as it is estimated that 45% of student loans will never be repaid, compared to initial estimates of 28%. It is believed that, should this percentage reach 48.6% the Government will begin to lose money, potentially offsetting any benefits by the increases in tuition fees. Concerns were also raised over the Government’s debt collection capabilities.