Student loan book for sale.

Student Loans: Ministers To Unveil £900m Sale

So what exactly will be the consequences of this and who will ultimately benefit the most.?

Government gets an amount of cash and removes the uncertainty as to the amount it would get back from these loans and when.

Private investors take a risk that they cannot reclaim as much outstanding debt as they expected (or it takes longer to recover), but gain if repayment rates are higher (or earlier ) than expected.

Mutually beneficial arrangement, with the party who ultimately benefit the most unknown until many years into the future!
;)
 
Not exactly. The Government would only have sold them for a fraction of the net worth. That means they have given up on the idea of them ever being repaid. Result that the tax payer will have to cover the rest of the losses. I suppose its marginally better than covering the entire loss. If the debt company makes a profit it is at the tax payers expense ultimately, but of course its a risk-which is naturally what a private enterprise does in order to make a profit.
 
Not exactly. The Government would only have sold them for a fraction of the net worth. That means they have given up on the idea of them ever being repaid. Result that the tax payer will have to cover the rest of the losses. I suppose its marginally better than covering the entire loss. If the debt company makes a profit it is at the tax payers expense ultimately, but of course its a risk-which is naturally what a private enterprise does in order to make a profit.

No!

The government will sell them at a fraction of their face value ie for an amount that represents their 'fair value' given that these are debts outstanding for 20ish years.
 
No!

The government will sell them at a fraction of their face value ie for an amount that represents their 'fair value' given that these are debts outstanding for 20ish years.

So what you're saying is the taxpayer has paid already.
 
No!

The government will sell them at a fraction of their face value ie for an amount that represents their 'fair value' given that these are debts outstanding for 20ish years.

A private company isn't going to be stupid enough to take on a debt burden without knowing it can achieve a return. I knew you would add the 20 year plus timescale but I have a different angle. There should never have been student loans. It was obvious that it would end up as a tax payer burden. So, something that is just a bit better than that doesn't strike me as being a great success. Its a necessity based on policy failure.
 
A private company isn't going to be stupid enough to take on a debt burden without knowing it can achieve a return. I knew you would add the 20 year plus timescale but I have a different angle. There should never have been student loans. It was obvious that it would end up as a tax payer burden. So, something that is just a bit better than that doesn't strike me as being a great success. Its a necessity based on policy failure.

Of course the private company is gambling on a return- but it depends on how much they can recover and future interest rates. That will be their risk.

The government is just looking at how things are now. i.e. a liability which could be on the books for years. Better to offload it for a fair price.

But as to your second point- "should never have been student loans' the alternative was for the tax payer to pay all the education costs which would have been more expensive. Not saying I am against that as I benefitted from a student grant - but that was when it was summer every day.
 
So just to clarify, students were leant tax payers money in the belief it would be less expensive than grants and that it would be repaid once a certain wage threshold was reached. Most of this tax payer loan has not been repaid because thresholds were never reached and the government is selling this liability off at a massive loss to companies who will, by necessity, use more aggressive means to make themselves a profit.?
 
Of course the private company is gambling on a return- but it depends on how much they can recover and future interest rates. That will be their risk.

The government is just looking at how things are now. i.e. a liability which could be on the books for years. Better to offload it for a fair price.

But as to your second point- "should never have been student loans' the alternative was for the tax payer to pay all the education costs which would have been more expensive. Not saying I am against that as I benefitted from a student grant - but that was when it was summer every day.

I'm sure you realise I wasn't suggesting the tax payer funded students :) ( you should have figured that one out by now ;-) ).

Neither do I disagree with unloading the loans now. Its an admission its gone wrong but no one is admitting it. Its no different to bailing out the banks. In fact it might be bailing out the banks when you consider the deficit. They should have let students take the loans from the banks directly instead of socialising debts.
 
A private company isn't going to be stupid enough to take on a debt burden without knowing it can achieve a return.

The return they make is a function of the likelihood of receiving future payments and the timing of those payments - if those factors were known with a high degree of certainty then the price of the debt would be that much higher!

The investors buying these debts will be those who have the infrastructure and administrative capabilities to track down the borrowers and claim what is due. That is where they can do things more efficiently and more effectively than the government.

I knew you would add the 20 year plus timescale but I have a different angle. There should never have been student loans. It was obvious that it would end up as a tax payer burden. So, something that is just a bit better than that doesn't strike me as being a great success. Its a necessity based on policy failure.

That's irrelevant to the point being made - you're just trying to score political points.
 
So just to clarify, students were leant tax payers money in the belief it would be less expensive than grants and that it would be repaid once a certain wage threshold was reached.

And that's exactly what happened, as most student debts were / are repaid.

Most of this tax payer loan has not been repaid because thresholds were never reached and the government is selling this liability off at a massive loss to companies who will, by necessity, use more aggressive means to make themselves a profit.?

No - most of the debt HAS been repaid.

The fact that SOME debt has been repaid means that this approach was cheaper than simply giving money through grants.

This is an asset, not a liability - that's why we can sell it for £££££ !
 
So what you're saying is the taxpayer has paid already.
The taxpayer gave the money upfront (just as they did with grants) - there are a proportion of loans which have not been repaid (probably for a variety of reasons - insufficient earnings, change of address / lost contact, fraud (!) etc - the repayments due are an asset for the taxpayer - they can either wait and watch these repayments drip feed in over the next 10+ years! with associated admin costs and uncertainty, or they can receive a cash payment in exchange for the asset.

Providing the assumptions underlying the purchase price are reasonable, and reflect the risks being taken, then this should be attractive for the taxpayer.
 
I'm sure you realise I wasn't suggesting the tax payer funded students :) ( you should have figured that one out by now ;-) ).

.

Sorry, wasn't paying attention at the back of the class ;)

I don't think any party could have proposed students get loans directly from a bank?
 
Sorry, wasn't paying attention at the back of the class ;)

I don't think any party could have proposed students get loans directly from a bank?


Plenty of student bank accounts came with attractive overdraft facilities and low cost loans.
 
So who will benefit and lose under this arrangement. Will there be a significant shortfall to the tax payer over the long to medium term and is this just a way of offing some numbers from the governments debt level.?
 
So who will benefit and lose under this arrangement. Will there be a significant shortfall to the tax payer over the long to medium term and is this just a way of offing some numbers from the governments debt level.?

I am unable to predict the future,
 
Surely the government and,by association, the tax payer, must be losing most .
 
Sorry, wasn't paying attention at the back of the class ;)

I don't think any party could have proposed students get loans directly from a bank?

If they had it would have created proper market competition. As it is the universities can share an over supply of students and that means there isn't any requirement to reduce cost through innovation, or cut the number of bogus degrees.
 
That's irrelevant to the point being made - you're just trying to score political points.

You mean I'm making a libertarian political point ? Then of course I am.:)
 
If it has a face value of 40 billion, and is being sold for less than a billion - then the maths appears obvious - unless I am missing something.!
 
The maths only becomes obvious if you know all the numbers. So far we have £1billion + "x" the cost of managing/reclaiming the debts on one side of the equation and "y" the amount of debt reclaimable which is obviously <£39 billion.
so long as y exceeds x by a reasonable margin it's a good deal for the buyer.
 
If it has a face value of 40 billion, and is being sold for less than a billion - then the maths appears obvious - unless I am missing something.!

These are debts outstanding for 20 years - either because (currently) there is no obligation to repay (e.g no income??) or because the person who took out the loan is unobtainable / refunding to pay etc etc.

The loans are clearly worth much less than face value - surely that's obvious?

Plus of course the cost of trying to obtain repayments needs to be deducted from the face value of the debts.
 
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