Three years after legislation to sell old student loans was put on hold in the United Kingdom, UK Government Investments is gearing up to unload around £12 billion in loans into the private market.
UK Government Investments, which manages a number of corporate governance and finance projects, has started discussions with financial advisers to launch an auction in the coming months. While the government hasn’t provided any details about the potential auction, a source told the paper that life insurance companies that have an annuities business may be interested in purchasing the loans.
In July of 2014 the U.K. government decided not to sell the student loans because lawmakers determined that selling the loans would not lower the government debt enough. The treasury department in the U.K. generates income from the old student loans and wanted to sell that income to private companies.
With the U.K. government renewing auction hopes, some are still questioning if it will do enough to reduce the debt to make the endeavor worthwhile. A statement in December by the U.K. government said it is continuing to pursue the sale of the student loans from before 2012 and that it is aiming to hold the first auction in early 2017.
The report noted that back in 2013, the government sold a book of student loans worth roughly £900m to Arrow Global and CarVal Investors. The price tag the companies paid for the loans was £160m. The companies and the government both didn’t expect the loans to be completely paid back.
Just like in the U.S., student loan debt is a growing problem in the U.K., with the average college student graduating with close to £40,000 in debt. And just like with U.S. student debt holders, many of the borrowers in the U.K. are struggling with repayment.
Author: Andrew Rombach
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