Government locked into non-cancellable contracts despite stopping debt sell-off
The Department for Education is paying out more than £220 million as a result of non-cancellable contracts, in part related to the now-scrapped policy of selling off the student loan book.
According to the DfE’s 2019-2020 accounts, the department has committed to paying £223 million as it had “entered into non-cancellable contracts…for the previous student loan debt sale and marking key stage tests”.
The accounts do not detail the split between costs associated with the student loan debt sale and commitments related to marking key stage tests, but they reveal that the DfE was set to pay £38 million in 2020, £137 million within the next five years, and £48 million after five years. The accounts do not give detail on the nature of the contracts.
In March, the DfE announced that it would stop selling off the pre-2012 student loan book after a Treasury review found future sales would have “a significant negative impact” on borrowing. Accounting changes to student loans introduced after an intervention by the Office for National Statistics (ONS) in December 2018 added around £12.4 billion to the national deficit.
Andrew McGettigan, a higher education journalist and author who highlighted the payments in a blog post, told Research Professional News that he was “not surprised by the amounts involved” as it is “an expensive business, but he said he was “surprised by the status of the contracts”.
“It also looks like some of the contracts were signed last year when we knew that the ONS was reviewing student loan accounting and that a sale would then have to be reviewed. That doesn’t look very smart,” he added.
The Department for Education has been contacted for comment.
Elsewhere, the Student Loans Company published early statistics showing the number of students who have dropped out of university since the start of term this year. It said that during the beginning of the 2020-21 academic year there had been “significant public interest in this data in order to contribute towards an understanding of how the Covid-19 pandemic may be impacting students”.
But the SLC stressed that it had “not seen any increase in student withdrawal notifications for the purpose of student finance in this academic year, compared to the previous two years”.
It explained that there had actually been a decrease in the number of withdrawal notifications it received compared to the past two years, although that could be down to Covid-19 and “the irregular start to the current academic year” and so conclusions should be made “with caution”.
Among students from England, Wales, Northern Ireland and the EU, 5,448 students asked to withdraw from their loans between 1 August and 29 November, compared with 6,113 in the same period in 2019-20 and 5,870 in 2018-19. In England alone, 5,040 asked to cancel their loans this term compared with 5,542 in 2019-20 and 5,290 in 2018-19.