To ask the Secretary of State for Education, what proportion of the Resource Account and Budgeting charge his Department estimates to be made up of maintenance loans that are not expected to be repaid.
24 May 2021
The Resource Account and Budgeting (RAB) charge is the estimated cost to the government of providing a subsidy for the student finance system. It is the proportion of loan outlay expected to not be repaid when future repayments are valued in present terms. The RAB charge is calculated by taking repayment forecasts for income contingent repayment loans and discounting them back to the period that the loan is issued using the discount rate provided by HM Treasury.
The department publishes forecasts of loan outlay and RAB charges for each loan product. The latest forecasts, published June 2020, are available at: https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2019-20.
The RAB charge in the 2019-20 financial year was forecast to be 53% for full-time higher education loans, and 45% for part-time higher education loans. Tuition fee loans and maintenance loans are both higher education student finance products. Borrowers who have taken out both tuition fee loans and maintenance loans repay these at the same time. Therefore, the department does not calculate separate RAB charges for tuition fee loans and maintenance loans.
In the 2019-20 financial year, the government provided £16,371 million of student loan funding to English funded full-time higher education students, of which £9,503 million was in tuition fee loans and £6,868 million in maintenance loans. The value of the loan outlay that is not expected to be repaid is known as the RAB cost and can be calculated by multiplying loan outlay by the RAB charge. Therefore, the RAB cost of full-time higher education tuition fee loans in the 2019-20 financial year was £5,036 million (£9,503 million × 53%), and the RAB cost of full-time higher education maintenance loans was £3,640 million (£6,868 million × 53%).