What happens to all the interest collected on the student loans?

Ms Down made this Freedom of Information request to Student Loans Company Limited

The request was successful.

From: Ms Down

14 December 2008

'WITHOUT PREJUDICE'

Dear Sir or Madam,

I note you state "The Student Loans Company Limited is a non
departmental public body, operating on a not for profit basis".

This has confused many students and parents here who have read your
comments as students are made to pay interest on their loans which
increases the amount they have to repay to your company. Further,
you are registered as a Limited Company and some parents here feel
that in itself signifies the need for profit to the Student Loans
Company Limited.

You also state "The Student Loans Company, administers
government-funded loans and grants to students throughout the
United Kingdom. We are responsible, in partnership with Local
Authorities in England and Wales, the Student Awards Agency for
Scotland, the Education and Library boards in Northern Ireland, the
Higher Education Institutions and HM Revenue & Customs, for student
support delivery in the UK. "

You clearly state you are 'RESPONSIBLE IN PARTNERSHIP WITH LOCAL
AUTHORITIES etc.." which are public bodies. Therefore, you should
be able to provide your clients email addresses for convenient and
direct communication with yourselves just as the Local Authorities
provide to their clients and just as you communicate with the local
authorities via email so should the public and your clients,
parents and students be afforded the same facility. Further by not
providing an email communication link are you not restricting our
freedom of speach. We certainly feel that you are behaving
unreasonably to withold this service from your clients who request
this facility for speedy and safe direct communication with you to
enable full expression of their personal concerns with your
company. In fact we feel it is also unreasonable to withold email
address from us by which to communicate as you are a Huge National
Limited Company working with our local authorities and for us via
our Government as you clearly state and no other company as large
as yourselves providing such a huge public service is witholding
the facility of email communication to its clients. (and banks even
let you contact them via email).

I request that you please clarify what happens to the interest
which is charged on the student loans. Therefore, for clarification
along with your response could you supply the yearly breakdown of
where/who this paid/raised interest is distributed to, by the
Student Loans Company.

Yours faithfully,

Ms Down

FYI from SLC website 13.12.08 you state that you charge interest
but not what it is used for / where it goes: as follows...;
"Interest Rate
The amount to be paid back will depend on the amount borrowed plus
the interest charged. Interest is linked to the rate of inflation
and is adjusted each year in line with the Retail Prices Index
(RPI). From 1 September 2008 to 31 August 2009 this will be 3.8%.
See previous years' interest rates. "

Link to this

From: FOI Publication Scheme
Student Loans Company Limited

24 December 2008

Dear Ms Down

I refer to your email dated 14 December 2008 requesting information under
the Freedom of Information Act.

Unlike other loans, interest on student loans are linked with the cost of
inflation. Usually the interest applied to student loans mirrors the
Retail Price Index ("RPI") published in the preceding March. However, ICR
loans have a special low-interest loan status, meaning the interest on
those loans has to be the lower of the RPI at March 31st or 1% above the
highest of the base rates of a nominated group of banks. For the first
time since the inception of ICR loans, the base rate of those banks fell to
2%, meaning that for the first time our interest rate has had to drop
mid-acadamic year and is currently 3% for ICR loans.

We appreciate that the application of interest in this manner is fairly
technical and can be confusing. However, the net effect of interest being
applied in this way is that the interest applied to student loans is merely
a reflection of the value of the loan at the later date. Any interest
accumulated on loans is therefore recouped by the student finance system
and along with the loan repayments themselves are reinvested back into the
Treasury for further student finance.

The Student Loans Company Limited has a designated operating budget that we
must not deviate from and our purpose is not to make profit but to ensure
an efficient means of administration and recovery of Government funded
loans, hence our status as a non departmental public body. We are a limited
company so that we can allow private sector input at Board level.

We do not feel it is unreasonable not to provide direct email address given
that we have alternative effective methods of communication set up to
ensure that we have direct contact with our customers, most suited to their
needs. Additionally, given that we have 900,000 new customers each year,
we also have to take a realistic view on our operational limits and how to
provide the most efficient service we can. We do not accept that it is a
restriction of free speech not to provide email addresses given we have
dedicated call centres to deal with customer enquiries.

You have specifically requested a breakdown of the figures for the
collection of interest. This information is available on our website:-
http://www.slc.co.uk/statistics/national... You will be able
to access particular information on interest in table 1 in the November
SFR.

I trust that my answer to you is satisfactory, however if you are unhappy
with information provided in relation to your freedom of information
request, you may ask SLC for an internal review. Any such appeal would be
conducted by Chris Andrew, Company Secretary, 100 Bothwell Street, Glasgow,
G2 7JD. You may request a review by writing to Chris Andrew or by emailing
the FOI Office ([SLC request email]).

If you are not content with the outcome of the internal review, you have
the right to apply directly to the Information Commissioner for a decision.
The Information Commissioner can be contacted at:

Information Commissioner's Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

Regards

Freedom of Information Office
Student Loans Company

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