Request made 23 April 2008
Request
Please could I receive details on profits made by the government by charging interest on loans issued to students.
Response
The Government makes no profit from them, either on individual loans or across the loans as a whole. The Government not only subsidises the interest rate charged to borrowers but also absorbs other associated costs such as where loans need to be written off.
Borrowers do pay interest on student loans, but this is outweighed by the Government's subsidy. The principle behind the loans is that borrowers should repay broadly the same amount, in real terms, as they borrowed. To do this interest is linked to the Retail Price Index (RPI) thus maintaining the value of the loan in real terms.
