Financial Year 2020-21

Student loan forecasts for England

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About this release

This statistics publication provides forecasts for higher education and further education student loans in England. These include forecasts of student numbers, student loan outlay and student loan repayments. Only income-contingent student loans issued to English domiciled students studying in the UK or EU domiciled students studying in England are included. The forecasts are based on models developed by the Department for Education (DfE), details of quality and methodology are provided in the methodology document accompanying this publication. 

This is the fifth in an annual series of statistics publications on student loan forecasts. It covers forecasts produced during the 2020-21 financial year, primarily covering the period 2020-21 to 2025-26.  This is the same period for which the Office for Budget Responsibility produced forecasts in their Fiscal Sustainability Report 2021. The forecasts of this publication consider impacts of Covid-19 on student entrants from 2020/21 onwards, in particular, the use of Centre Assessed Grades in 2020/21, as well as medium-term behavioural changes in applicants and by HE providers. Economic forecasts are based on the Central scenario forecast by the OBR in their Fiscal Sustainability Report 2020. 

Any changes to economic forecasts and student finance policy could affect the student loan forecasts presented in this publication. Changes in student finance eligibility for EU domiciles have been included in this forecast. EU domiciled student entrant forecasts have been assumed flat from 2021-22 onwards due to the uncertainty of EU student recruitment as a result of the removal of student support. 

We have been considering the Augar Report and its recommendations carefully. We plan to respond to the report alongside the next multi-year Spending Review, providing the sector and students with certainty about the future of post-18 education and funding. Any changes to student loan eligibility, quantum or terms and conditions, if implemented by Government, could affect the forecasts presented in this publication.

The recent announcement of the Lifelong Learning Entitlement as part of The Skills and Post-16 Education Bill has not been considered for these forecasts.

The recent announcement of changes to the maximum Plan 2 and Plan 3 interest rates between 1 July 2021 until the 30 September 2021 has not been included in these forecasts. 

The accompanying Methodology document provides information on the models, their data sources and the methodology and assumptions used in producing the forecasts. 

We welcome feedback on this publication and the forecasts presented within it at he.modelling@education.gov.uk.

Covid-19 assumptions

Student numbers 

Forecasts in this publication were developed in April 2021, and so, encompass the available data and assumptions relevant at that time. For example: 

The 2020/21 forecast captures the growth in UCAS non-deferred accepted applicants, and thus the changes to A Level results and removal of student number caps. Yet, it remains a forecast without outturn data on student entrants in 2020/21, which will not be available until January 2022. Changes in entry rates, which is highly possible given the atypical events that unfolded in 2020, can lead to differences between growth in accepted applicants and student entrants.  

The 2021/22 forecast considers the growth in UCAS 2021/22 applicants by the January deadline. However, further assumptions were required regarding both applicant and provider behaviour for how this growth would equate to student entrants.  

The forecasts consider the medium-term impacts Covid-19 may have on the economy and labour market, and how both applicants and providers may behave in response to this.  

Nursing, midwifery and allied health profession (AHP) forecasts consider the impacts that Covid-19 may have on the uptake of these courses, however, Department of Health & Social Care (DHSC) policy interventions remains the most influential driver in these student numbers.  

See the methodology document for further detail on how Covid-19 has been factored into the forecasts. However, it should be noted that the full impact is still currently unknown and inherently uncertain due to the complexity of Covid-19 and the many factors that may impact both student and provider behaviour, ultimately driving student numbers.  

Loan repayments 

The student loan repayments forecast makes use of the OBR’s Economic and Fiscal Outlook March 2021 macroeconomic projections. The changes compared to the central Covid scenario used for the forecast presented in last year publication are mainly around medium term projections of the RPI and average earnings. The RPI and earnings projections converge to the pre-Covid figures in 2025-2026. The Bank of England base rate for 2025-26 and beyond is assumed to converge to the projected pre-Covid value by financial year 2040-41.  

Compared to the central Covid scenario from the OBR Fiscal Sustainability Report 2020 the determinants imply the following: 

Higher 2020-21 RPI by 1pp followed by lower RPI until 2025-26. The decrease in RPI compared to the central Covid scenario is the highest in 2023-24 at -1pp. RPI affects discounting and interest rates of all loan types.  

Higher earnings forecast in 2020-21 by 0.2pp, followed by lower earnings in the following years. The decrease in 2021-22 is largest at -0.9pp until which it tapers off until the projections converge in 2025-26. Earnings growth impacts both individual earnings and the repayments threshold for Plan 2 loans.  

Minor changes in the range of -0.1pp to the Bank of England rate over medium term. With the Bank of England base rate projected to remain low, it is expected that the Plan 1 interest rate will follow the Bank of England base rate for much of the coming decade. 

The relatively minor changes to the macroeconomic determinants between central Covid scenario and March 2021 project and their convergence in medium- and long-term result in only small impacts on RAB charge forecast. 

Loan outlay 

The outlay forecast also makes use of the March 2021 Economic and Fiscal Outlook forecasts. The RPIX projections follow a similar pattern to the RPI figures as described. The RPIX figure is assumed to converge to the projected pre-Covid value by financial year 2025-26. 

The RPIX determinants associated with this scenario imply the following: 

The RPIX rate is forecasted to fall between 2021-22 and 2022-23. From 2022-23 the RPIX rate increases, before remaining steady from 2024-25 onwards. RPIX affects the uprating of all loan types.  

Since last year’s publication, RPIX forecasts increased for 2021-22. However, across the years 2022-23 to 2024-25, the RPIX forecasts decreased from those used in the 2020 publication. There was minimal or no change to the forecasts for all other years. 

SLC’s Early-in-Year Student Withdrawal Notifications publication (February 2021) stated that SLC had not seen any increase in student withdrawal notifications in academic year 2020-21 compared to the two previous years. As a result, no changes to withdrawal rates have been made in the outlay model. In addition, no changes to expected study location due to the Covid-19 pandemic have been included.  

Student entrants forecasts

Full-time undergraduate entrants eligible for tuition fee loans are forecast to grow 5.9% over the forecast period, from 406,000 in 2019/20 to 430,000 in 2025/26. This is largely driven by growth in the 18-year-old population in England from 2021, as well as increased participation rates expected as a result of Covid-19 and HE policy changes.

DfE’s higher education (HE) student entrants model forecasts the number of full-time undergraduate England-domiciled student entrants to UK providers and EU-domiciled student entrants to providers in England. These are all student entrants, whether eligible for a student loan or not. A subset of these student entrants is then forecast as the population eligible for tuition fee loans from Student Finance England (SFE). 

The provider types included are specifically: English higher education institutions (HEIs) and designated Alternative Providers (APs) registered with the Office for Students (OfS) as an Approved (fee cap) provider; HEIs in the devolved administrations. These providers capture the vast majority of HE full-time undergraduate student entrants to Approved (fee cap) providers and eligible for maximum annual tuition fee loans of £9,250 – see the methodology document for more detail. 

Since academic year 2017/18, nursing, midwifery and allied health profession (AHP) entrants have been eligible to apply for tuition fee loans. Fee loan-eligible entrants to these courses are forecast separately from the wider population as they are expected to grow at a higher rate, with specific Government policies aimed at increasing the uptake of these courses.

Figure 1 and Table 1a show the forecast number of student entrants, by domicile, against 2019/20 outturn, and Table 1b the equivalent annual growth rates, also against projected growth in the 18-year-old population in England.

Since the September 2020  publication, the forecasts have seen upward revisions to total student entrants. Outturn HESA data showed that in 2019/20 there were more England- and EU-domiciled student entrants than previously anticipated. The changes to A-Level exams in 2020 and subsequent removal of student number controls led to higher estimates of both England- and EU-domiciled student entrants in 2020/21. In the academic years following, both student and provider behavioural changes affecting England-domiciled student entrants are believed to increase the total number of entrants previously expected, with this outweighing decline in EU-domiciled student entrants. 

There are a few key drivers of growth for England-domiciled student entrants (which are forecast to grow 9.8% from 2019/20 to 2025/26). First, projected growth in the 18-year-old population in England, which is estimated to be 12.8% over the same period. Second, increased participation rates among students (particularly of 18-year-olds) as a result of impacts of Covid-19 to the economy and labour market. Third, HE policy changes, such as the removal of student finance for EU nationals, which is expected to result in additional capacity for providers to increase offer rates to domestic (as well as non-EU overseas) students.

As highlighted, the removal of student finance for EU nationals is expected to result in a decline in EU-domiciled student entrants (-41.6% in 2021/22). The forecast is held constant from 2021/22 due to the uncertainty of how EU students will respond to this change over time. There will remain a small portion of EU-domiciled student entrants eligible for tuition fee loans, such as those eligible under Citizens’ Rights or as one of the specific eligible groups. However, this portion is estimated to be so small (around 6% of the 2020/21 total in 2021/22, diminishing each academic year following) that it has little impact on the growth in fee loan-eligible entrants. Further information on loan eligibility and for home fee status for the 2021/22 Academic Year is available at: New eligibility rules for home fee status and student finance for the 2021 to 2022 academic year (publishing.service.gov.uk).

Figure 2 and Table 2a present the forecast number of tuition fee loan-eligible entrants, by domicile and whether nursing, midwifery and AHP, and Table 2b the equivalent annual growth rates.

The factors discussed for student entrants have a knock-on impact to fee loan-eligible entrants. For those exclusive of nursing, midwifery and AHP entrants, however, from 2023/24 onwards, the removal of student finance for EU nationals outweighs the positive changes seen, as naturally the reductions in EU-domiciled fee loan-eligible entrants will be higher than for student entrants. As well as those impacts discussed, total fee loan-eligible entrants inclusive of nursing, midwifery and AHP have declined compared to the previous publication due to downward revisions to nursing, midwifery and AHP forecast entrants to better align to the population eligible for tuition fee loans from SFE.

Overall, full-time undergraduate fee loan-eligible entrants, inclusive of nursing, midwifery and AHP, are forecast to grow 5.9% between 2019/20 and 2025/26, with the majority of growth expected up to 2020/21. Although total student entrants are forecast to grow 4.0% in 2021/22, total fee loan eligible-entrants are forecast to decline 0.2% due to the vast majority of EU-domiciled student entrants being ineligible for student finance (resulting in a 93.6% reduction in EU-domiciled fee loan-eligible entrants, which outweighs the growth in other fee loan-eligible entrants). Thereafter, total growth in fee loan-eligible entrants is much closer to that of total student entrants because the reductions in EU-domiciled fee loan-eligible entrants are much less, both in relative and proportionate terms.

Nursing, midwifery and AHP fee loan-eligible entrants are forecast to grow from 25,000 in 2019/20 to 32,000 in 2025/26, this is at a much higher rate (28.8%) to other fee loan-eligible entrants (19.9% for England-domiciles and -97.1% for EU-domiciles, 4.4% overall).  The forecast growth rate for nursing, midwifery and AHP aligns with that expected by Department of Health and Social Care (DHSC). While application trends are important for determining appetite to study, available clinical placements and DHSC policy intentions are the main drivers of growth in nursing, midwifery and AHP student entrant numbers. 

Student loan outlay forecasts

The DfE student loan outlay model and Advanced Learner Loans model forecast the amount that the Department for Education expects to lend to students taking out loans via the Student Loans Company (SLC). The SLC manages a number of different loan products which are available to students studying different types of qualification. The following loan products are available:

  • Plan 1 loans – the loan system for students that started courses before September 2012 that are eligible for undergraduate student support funding, consisting of fee loans and maintenance loans.
  • Plan 2 full-time higher education loans – the loan system for students on full-time courses that started since September 2012 that are eligible for undergraduate student support funding, consisting of fee loans and maintenance loans.
  • Plan 2 part-time higher education loans – the loan system for students on part-time courses that are eligible for undergraduate student support funding. These first became available in September 2012, consisting of a tuition fee loan. Since August 2018 maintenance loans are also available for some part-time students.
  • Advanced Learner Loans – a fee loan available to further education learners who meet the eligibility criteria. These were introduced in August 2013 and are on the Plan 2 repayment system.
  • Postgraduate master’s loans – loans available to master’s students to help cover fees and living costs. They were introduced in August 2016 and are on the Plan 3 repayment system.
  • Postgraduate doctoral loans – loans that became available to doctoral students in August 2018 to help cover fees and living costs. They are on the Plan 3 repayment system.

Table 3a and 3b show the student loan outlay forecast by loan product for the financial years 2020-21 to 2025-26.

Total student loan outlay is forecast to increase from £19.1 billion in 2020-21 to £22.1 billion in 2025-26, in nominal terms.  Loan outlay is expected to remain relatively stable between 2020-21 and 2021-22, due to the forecast decline in EU entrants, followed by annual increases in student loan outlay, which are expected to peak at 4.3% in financial year 2023-24.

Some of this forecast increase is as a result of several changes made to the student loans policy by Government. Maintenance grants were replaced with maintenance loans for new entrants from academic year 2016/17, and new nursing, midwifery and most allied health entrants from 2017/18 became eligible for student loans for financial support in place of receiving NHS bursaries. These changes will lead to increases in loan outlay each year until the new policy applies to students in all course years. The introduction of master’s loans in 2016/17, and doctoral loans and maintenance loans for part-time higher education students in 2018/19 are also expected to lead to further increases. The increase in the total student loan outlay forecast from 2023-24 to 2025-26 is driven by assumed inflationary increases in the Plan 2 fee and maintenance loans. 

No Plan 1 loan outlay is forecast as these loans are only available to students who started courses prior to September 2012 and modelling assumes all students receive a maximum of 6 years of support from when they start their course. However, there are some exceptional cases where students may still be paid a Plan 1 loan later than this, e.g. if they had suspended their studies. Complete information on the student finance arrangements in England can be found at: https://www.practitioners.slc.co.uk/policy.

The slight decrease in Plan 2 Higher education fee loan outlay from 2020-21 to 2021-22 is driven by the forecasted decline in EU domiciled entrants between the academic years 2020/21 and 2021/22 and their average fee loan amounts being higher than those of England domiciled entrant borrowers. Loan-eligible EU domiciled students are entitled to fee loans only, which is why Plan 2 Higher education maintenance loan outlay forecast does not decrease between these years. Forecast increases in Plan 2 Higher education loan outlay from 2022-23 onwards are due to forecasted increases in Plan 2 entrants eligible for loans and the increase in average loan amounts in line with forecast RPIX inflation.

The decrease in Plan 3 postgraduate master’s loan outlay from 2021-22 to 2022-23 is driven by a forecasted decline in EU domiciled entrants. The impact of the Covid-19 pandemic, has driven an increase in the number of master’s loan borrowers in academic year 2020/21. 

Plan 3 postgraduate master’s loan outlay (from 2022-23 onwards) and postgraduate doctoral loan outlay (from 2020-21 onwards) is forecast to increase year-on-year due to projected growth in loan take-up by current and additional entrants over this period. The average loan amounts for both postgraduate loans are forecast to increase in line with RPIX inflation.

Advanced Learner Loans outlay is forecast to decrease from £180m in 2020-21 to £172m in 2025-26. This is mainly driven by a decrease in the number of learners taking loans, which is expected to fall due to policy changes for funding at level 3. It is assumed that around 9.5K of learners 24 and older who would previously have taken an Advanced Learner Loan will now be grant funded (see the quality and methodology information document accompanying this publication for more information).

The average forecast loan outlay per student is displayed in Table 4. It is assumed that the maximum loan amounts that students can take out will increase each academic year by forecast RPIX inflation measure, as forecast by the Office for Budget Responsibility (OBR). Since the majority of borrowers take out the maximum loan available to them, it is assumed that the average loan amount take-out will also increase by this amount. The exception is that from academic years 2019/20 to 2022/23, higher education tuition fee loan maximums have been fixed at the same level as in 2018/19. Instead, a smaller increase in average outlay is assumed to allow for providers increasing fees on courses for which they are not already charging the maximum (see quality and methodology information document for more information on the model assumptions). 

This results in the average annual loan outlay for Plan 2 full-time higher education loans increasing by 4% between 2020/21 and 2022/23. The average full-time maintenance loan is forecast to increase by 6.0% between 2020/21 and 2022/23 whereas the average full-time tuition fee loan is forecast to only increase by 1.1% in this timeframe due to the tuition fee freeze. From 2022/23 onwards where no tuition fee cap is included the growth in average full-time higher education loan outlay increases to around 3% per year.

Average annual loan outlay for Plan 2 part-time higher education loans increases by 6.2% between 2020/21 and 2022/23. Like Plan 2 full-time higher education loans, from 2022/23 onwards the growth in average part-time higher education loan outlay is around 3% per year.

For Plan 3 masters loans, the average annual loan outlay increases by 3.8% between 2020/21 and 2022/23, while for Plan 3 doctoral loans the increase is 3.9%. As above, from 2022/23 onwards the growth in average outlay for both masters and doctoral loans is around 3% per year.

Student loan repayment forecasts

The DfE student loan repayment model and Advanced Learner Loans model forecast the future repayments that DfE expects borrowers to make on loans taken out under the English student loan system, which are used to value total student loan balances in the DfE annual accounts. Future repayments can also be presented as relative measures of Government subsidy, which includes the Resource Accounting and Budgeting (RAB) charge and stock charge.

The Resource Accounting and Budgeting (RAB) charge and the stock charge

The RAB and stock charges are the estimated cost to Government of providing a subsidy for the student finance system. They are the proportion of loan outlay (the RAB charge) and of the total outstanding loans (the stock charge) that are expected not to be repaid when future repayments are valued in present terms using the HMT discount rate of RPI+0.7% per year.

See the quality and methodology information document accompanying this publication for more information.

For 2020-21 the key results are:

  • The RAB charge for Plan 2 full-time higher education loans is 53%. While most borrowers will repay at least some of their loan, the income contingent nature of the loans means that most loan borrowers are not expected to fully repay their whole loan balance in full. This is because of the combination of the size of their initial loan amounts, the level of the earnings threshold above which borrowers are required to make repayments (£26,575 in 2020-21), any unpaid balance being cancelled after 30 years and the interest rate on the loans that varies between RPI and RPI+3% depending on a borrower’s income and whether they are still studying.
  • For part-time higher education students, the RAB charge is 46%. Part-time students generally take out smaller loans than full-time students, meaning they are more likely to repay a higher proportion of their loans. Maintenance loans for part-time students were extended to on-‑campus, degree level borrowers only in 2018/19. Distance learners and on-campus, sub-degree borrowers are eligible for tuition fee loans only.
  • The Advanced Learner Loans RAB charge is 67%. While Advanced Learner Loan borrowers typically take out smaller loan amounts than higher education loan borrowers, they are also expected to have comparably lower future earnings than higher education loan borrowers. A proportion of the loans are also cancelled early, as students that receive a loan while studying for an Access to Higher Education Diploma will have their loan balance cancelled if they go on to complete a higher education course.
  • Master’s loans have a RAB charge of 0%, meaning that it is expected that the overall net present value of borrowers’ future repayments will be at least as high as their initial loan outlay. Compared to the other loan products, master’s loan borrowers generally receive smaller loan amounts than Plan 2 borrowers, and are expected to have higher earnings. They also have a lower repayment threshold than Plan 2 borrowers (£21,000 in 2020-21) and a higher interest rate of RPI+3% that will result in many of them repaying a larger amount. The Government announced that the repayment threshold will remain fixed at £21,000 in 2021-22.
  • The Plan 1 stock charge is 38%. This covers loans issued to students that started courses between academic years 1998-99 and 2011-12, which have not been repaid in full by the start of 2020-21. It is lower than the Plan 2 higher education stock charge as these borrowers took out smaller loans and have a lower repayment threshold (£19,390 in tax year 2020-21). This is despite Plan 1 having a lower interest rate and entrants from 2006-07 having their loans cancelled 25 years after they become liable to make repayments (compared to 30 years under Plan 2).
  • These figures do not provide a direct comparison of the overall level of Government subsidy provided to the higher education sector under each system, as the Plan 1 system also involved a higher level of teaching and maintenance grants than the current Plan 2 system. A comparison of how the balance of contributions between taxpayers and students has changed over time under different systems can be found in the “Estimating the changing cost of the English higher education system to taxpayers and students” annex of the Augar Report.

Table 5a shows the forecast RAB charges in financial years 2018-19 to  2025-26. These cover loans issued in each financial year to English domiciled students studying in the UK and EU domiciled students studying in England. 

The updated macroeconomic projections for RPI, bank rate and earnings growth in the OBR’s Economic and Fiscal Outlook drive the minor decrease of RAB charge for Plan 2 full-time student loans between 2020-21 to 2025-26. More details on the modelling methodology can be found in the technical notes accompanying this publication.

The Stock and RAB charge forecasts rely on earnings and repayment projections forecast over the next 30-40 years, and as such are sensitive to the assumptions used in the models. For example, an RPI of 1 percentage point (pp) lower beginning from financial year 2020-21 would lower the forecast 2020-21 RAB charge by up to 5pp for Plan 2 full-time loans. The percentage point change in 2020-21 Plan 2 full-time  RAB charge forecasts as a consequence of varying key individual economic and policy model inputs is documented in the RAB charge sensitivity data accompanying this publication. For more details please see the quality and methodology document accompanying this release.

Since the last student loan forecasts release in September 2020, there have been revisions to the data, economic assumptions, policies and modelling methodology used within the student loan repayment and earnings models. These updates will all contribute to varying degrees to any changes over time in the forecast of figures such as RAB charge, stock charge and percentage of borrowers expected to fully repay their student loans. Current assumptions about the future student finance system are set out in the methodology document in the student loans earnings and repayments model chapter, while the assumptions about future tuition fee and maintenance loans are covered in the student loan outlay chapter.

Table 6 shows the transfer proportion forecast for financial years 2018-19 to 2025-26. The transfer proportion is used within the Office for National Statistics (ONS) public sector finance statistics. Under the partitioned loan transfer approach, student loan outlay is partitioned into lending and transfer elements. Conceptually the transfer proportion is the fraction of student loan outlay identified at loan inception as government expenditure, in recognition that this portion of the loan is unlikely to be repaid. The transfer proportion is forecast to remain the same in 2020-21 compared to previous year forecast for Plan 2 full-time loans and decrease by 2pp for Master’s loans. .

The transfer proportion differs from the RAB charge in the way future repayments are discounted to present values. The discounting of future repayments used for calculating the transfer proportion is based on the individual borrower’s interest rates, which vary across different loan products. This is why the transfer proportion can be lower or higher than the RAB charge for different loan products. This reflects the different use of the transfer proportion and RAB charges. Further information is available in the ONS discussion on the alternative valuations of future repayments.

Figure 7  shows the proportion of students starting courses in the 2020/21 academic year that are forecast to fully repay their loans. This is lowest for full-time higher education borrowers at 25% as they will have the highest loan balances. The remaining 75% will generally repay part of their loan balance, with some almost fully repaying. The higher education full-time RAB charge is therefore close to that of part-time higher education borrowers and Advanced Learner Loan borrowers, despite the lower proportion that finish repaying their loans. The proportion of plan 2 borrowers expected to have repaid their loans in full has not changed compared to 2019-20 cohort forecast published in the  last student loans forecasts release in September 2020

Despite the 0% RAB charge, around 30% of master’s loan borrowers are expected not to fully repay their loan during their 30-year repayment term. In addition, these borrowers have interest rates fixed at RPI+3%. This may mean that the discounted repayments of some borrowers meet or exceed the total outlay provided, but do not fully pay off the interest accrued on the loan before the end of the repayment term.

Figure 8 shows the amount of student loan repayments forecast to be made each year from 2020-21 to 2025-26. They are expected to rise steadily over this period from £2.8 billion in 2020-21 to £4.8 billion in 2025-26. The rise is largely a result of increasing numbers of Plan 2 borrowers becoming liable to make repayments over this period, whereas the amount repaid by Plan 1 borrowers flattens out as the number of borrowers liable to make repayments reduces. 

The SLC have published figures for repayments posted to customer accounts in 2020-21 in their June 2021 release. These are not directly comparable to these forecasts, due to the point at which repayments via self assessment are reported. Repayments via self-assessment posted to student loan accounts in 2020-21, in SLCs publication, will mainly relate to earnings during 2019-20. Repayments in this publication are forecast against the year income was earned. As such repayments due on self-employed earnings in 2020-21 are included in total 2020-21 forecast repayments.  

Tables 9a and 9b show the number of borrowers liable to make repayments and number of borrowers earning above repayment threshold from 2020-21 to 2025-26. It is expected that the number of student loan borrowers liable to make repayments will rise from 4.7 million in 2020-21 to around 7.3 million in 2025-26. An increase in the number of Plan 2 borrowers liable to make repayments drives the overall upward trend, while the number of Plan 1 borrowers decreases from 2.5m to 2.0m over the same period. 

The number of borrowers earning above repayment threshold is expected to increase from 2.0m in 2020-21 to 3.0m in 2025-26. Out of all Plan 1 borrowers liable to make repayments 58% are expected to be above the repayment thresholds in 2020-21 and 57% in 2025-26, however the total number of Plan 1 borrowers liable to repay is expected to decrease by 18% over this period as loans are repaid. The proportion of Plan 2 full-time borrowers above the repayment threshold increases from 31% in 2020-21 to 36% in 2025-26, and the number of Plan 2 full-time borrowers liable to repay more than doubles. Due to this changing composition of the loan borrowers liable to repay the total proportion of borrowers above the repayment threshold decreases from 44% in 2020-21 to 41% 2025-26.

Student loan projections

Figure 10 shows the forecast outstanding balance of student loans projected over the next 50 years. These projections depend on the underlying assumptions used in their forecasting and are inherently uncertain due to uncertainties associated with these assumptions and approximations. These projections are intended to give an indication of how the outstanding balance of student loans could grow if current policies and trends continue. This long-term projection is derived by extending the following assumptions from the short-term model (which provides forecasts up until 2025-26) over the next 50 years:

  • Average student loan outlay per borrower increases each year in line with forecasts for RPIX from the Office for Budget Responsibility’s (OBR) March 2021  Economic and fiscal outlook.
  • Loan borrower entrant numbers vary in line with the Office for National Statistics (ONS) 2016-based principal population projections, weighted to the age profile of new entrants for each loan product.
  • Future entrants have the same distribution of characteristics, loan amounts (uprated by RPIX) and earnings (uprated by OBR average earnings growth forecasts) as the 2025-26 entrants in the DfE student loan repayment and Advanced Learner Loans models.
  • The maximum loan amounts, repayment thresholds and interest thresholds are uprated annually as appropriate. There are no other changes to student loan policies.

Under these assumptions the outstanding balance on student loans is anticipated to reach a peak of around £544 billion in 2020-21 prices in the early 2050s, at around the time that the first few cohorts of Plan 2 loan borrowers reach the end of their 30 year repayment terms and have any remaining loan balance cancelled. At this time, the nominal face value of the student loans would be approximately £1.3 trillion.

Official statistics

These are Official Statistics and have been produced in line with the Code of Practice for Statistics. This can be broadly interpreted to mean that the statistics:

  • meet identified user needs;
  • are well explained and readily accessible;
  • are produced according to sound methods, and
  • are managed impartially and objectively in the public interest.

Once statistics have been designated as Official Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

The Department has a set of statistical policies in line with the Code of Practice for Statistics.

Definitions

Academic yearThe year from 1 August to 31 July. Throughout the publication this is denoted in the format ‘2012/13’ to describe the year from 1 August 2012 to 31 July 2013.
Advanced Learner Loan (ALL)A fee loan payable to Further Education (FE) providers on behalf of FE learners who meet the eligibility criteria and started a FE course on or after 1 August 2013.
Cancelled loans

The borrower no longer has any liability to repay, as provided for in the loan’s regulations. A borrower’s liability is cancelled:

  • On the death of the borrower;
  • On reaching the age or length of time cancellation criteria for their loan (which varies by loan product); or,
  • If borrower is in receipt of a disability related benefit and permanently unfit for work.
  • Borrowers who study Access to HE courses and complete a higher education course have any outstanding ALLs balance written off.
Capitalised interestThe interest accrued on student loans is added to a borrower’s loan balance, rather than requiring repayment at the time it is accrued.
Doctoral loanLoans issued to students on Doctoral courses, on the Plan 3 repayment system. They are paid directly to students and can be used to cover fees or living costs.
DomicileThe usual residence of a student in the period prior to commencement of study. The financial support available to students from Government can vary for students from different domiciles. This publication includes forecasts of entrant numbers for English and EU domiciled students. Wherever ‘EU domiciled’ students are referred to this includes students domiciled in countries other than the UK that count as EU domiciled for funding purposes. 
EntrantsStudents in their first year of study. Defined as those starting a course in the academic year who have not been active at the same broad level of study at the same provider in either of the two previous academic years.
Face value of loan bookThe total outstanding balance of the loan book. This will include all previous loan outlay and accrued interest, less any repayments or loan cancellations.
Financial year

The year from 1 April to 31 March. Throughout the publication this is denoted in the format ‘2012-13’ to describe the year from 1 April 2012 to 31 March 2013.

Some aspects of the student loan system are based on tax years (the 12-month period starting on 6 April), but as a simplification the student loan models assume that this is the same as the equivalent financial year.

Fully repaid loanThe borrower has repaid the loan in full during their repayment term without it being cancelled.
Higher education full-time loanLoans available to students on full-time higher education courses, including first degrees, sub-degrees and certain postgraduate courses (e.g. Postgraduate Certificate in Education or PGCEs) that are eligible for the undergraduate loan system
Higher education part-time loanLoans available to students on part-time higher education courses with an intensity of 25% or higher.
Household Residual IncomeThe household gross income minus payments to private pension schemes, additional voluntary contributions and employment related costs as well as allowances for dependants and students.
Income Contingent Repayment (ICR) loanLoans for which the required repayments are based on the borrower’s income. The type of student loan that has been available to students since 1998.
Liable to make repaymentsThe borrower has a remaining loan balance and has reached their Statutory Repayment Due Date (SRDD). 
Maintenance loanMaintenance loans are loans to cover living costs, paid directly to the student.
Master’s loanLoans issued to students on Master’s courses, on the Plan 3 repayment system. They are paid directly to students and can be used to cover fees or living costs. 
Plans 1, 2 and 3

The ICR loan scheme has been separated into different repayment arrangements called Plans 1, 2 and 3. While they operate in a similar manner, they differ in some ways such as the repayment thresholds, interest rates and the length of borrowers’ repayment terms.

Plan 1 is the loan system for undergraduate students that started courses before September 2012, Plan 2 the system for undergraduates since September 2012 and for Advanced Learner Loans, and Plan 3 the system for postgraduate loans introduced in 2016.

Resource Account Budgeting (RAB) chargeUsed in the DfE annual accounts, this is the proportion of loan outlay that is expected to not be repaid when future repayments are valued in present terms.
Repayment termThe period for which a loan borrower is liable to make repayments based on their income. At the end of a borrowers’ repayment term any remaining loan balance is cancelled.
Repayment thresholdThe annual income threshold above which borrowers are required to make repayments on any eligible income. Plan 1 and Plan 2 loan borrowers are required to pay 9% of any earnings above the threshold and Plan 3 borrowers will be required to repay 6%.
Statutory Repayment Due Date (SRDD)The point a borrower becomes liable to begin repaying a loan, normally the start of the tax year (6 April) after graduating or otherwise leaving their course. After their SRDD, borrowers are required to make repayments if their income is above the repayment threshold.
Stock chargeUsed in the DfE annual accounts, this is the proportion of the total outstanding face value of the loan book that is expected to not be repaid when future repayments are valued in present terms.
Tax yearThe 12-month period starting on 6 April. As a simplification, the student loan models assume that this is the same as the equivalent financial year running for 12 months from 1 April. Repayment thresholds are fixed for the duration of each tax year and borrowers’ SRDDs are at the start of the tax year after they graduate or otherwise leave their course.
Transfer proportionUnder the partitioned loan transfer approach, student loan outlay is partitioned into loaned and transferred funds. Conceptually the transfer proportion is the fraction of student loan outlay identified at loan inception as government expenditure, in recognition that this portion of the loan is unlikely to be repaid. 
Tuition fee loanTuition fee loans are loans to cover all or part of the cost of tuition. They are paid directly to the learning provider.
Voluntary repaymentA borrower can at any time choose to repay some or all of their loan balance early, in addition to any repayments they are liable to make based on their income.

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