- 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 outlaypared 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.
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.
Since the last student loan forecasts release in , there have been revisions to the data, economic assumptions, policies and modelling methodology used within the student loan repayment and earnings models
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.
These cover pay day loans in Indiana loans issued in each financial year to English domiciled students studying in the UK and EU domiciled students studying in England
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.