The average loan amounts for both postgraduate loans are forecast to increase in line with RPIX inflation
Plan 3 postgraduate master’s loan outlay (from 2022-23 onwards) and postgraduate d-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.
Advanced Learner Loans outlay is forecast to -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). The exception is that from academic years to , higher education tuition fee loan maximums have been fixed at the same level as in . 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 and . The average full-time maintenance loan is forecast to increase by 6.0% between and 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 onwards where no tuition fee cap is included the growth in average full-time higher education loan outlay increases to around 3% per year.
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
Average annual loan outlay for Plan 2 part-time higher education loans increases by 6.2% between and . Like Plan 2 full-time higher education loans, from 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 and , while for Plan 3 d/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 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.
- 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.