09 March 1999

Education and Employment Minister Baroness Blackstone today announced the outcome of the second competition to sell a portfolio of around £1 billion of 'original scheme' student loans to the private sector. The successful bidder is a consortium of the Nationwide Building Society and Deutsche Bank AG. As a result, the portfolio will be sold to HONOURS Trustee Limited, a company formed for the purpose of acquiring the assets.

The sale is in line with the Government's policy of developing public-private partnerships which transfer risk to the private sector and of disposing of public assets which are no longer needed to enable the financing of investment in key public services, such as education. It will also enable the markets to establish a clearer understanding of student loans.

Baroness Blackstone said:

"We have run a very vigorous competition which has attracted interest from a number of financial institutions. We have accepted the most competitive bid, and in doing so helped meet our commitment to work within our spending plans this year."

The purchaser has appointed the Student Loans Company as its administrator. Borrowers will notice little difference from existing arrangements. They will retain their existing rights of deferment, and the interest rate will continue to be pegged to inflation.

The Student Loans Company will shortly be writing to all of its current 'original scheme' borrowers, whether their loans have been sold in this sale or not, to inform them of the outcome. The letter will also confirm the key loan agreement terms that are protected, the role of the independent assessor and the standards which the purchaser must meet.

None of the new income-contingent loans introduced at the beginning of the current academic year are involved in the student loan debt sales.

Editor's Notes

This press notice relates to England

  1. Arrangements for the second debt sale competition were announced on 7 August 1998 (press notice 397/98). The outcome of the sale was announced today in a written reply to Parliamentary Questions from Kali Mountford MP and Lord Burlison.

2. The Government has been advised in this sale by the merchant bank N M Rothschild & Sons, and the commercial lawyers Lovell White Durrant.

3. The Student Loans Company Limited (SLC) is wholly owned by the Government. It administers the student loans scheme within the legislative framework of the Education (Student Loans) Act 1990, the Education (Student Loans) (Northern Ireland) Order 1990 and associated regulations.

4. So far in the academic year 1998/99 nearly 390,000 original scheme loans have been paid out. In addition some 190,000 new income contingent loans, introduced at the beginning of the current academic year, have been paid out. The cumulative total of borrowers using both schemes is now almost 2.0 million.

5. The terms of the original student loans scheme mean that borrowers do not begin repayments until the April after they finish their studies or leave their course; only have to repay loans once their income is 85% of national average earnings or above (£17,784pa in 1998/99); and have their loan pegged to inflation, in real terms repaying no more than they borrowed. These terms will remain unchanged.

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Press Notice 1999/0106
Previously known as (Previously known as 106/99)