Table 5a shows the forecast RAB charges in financial years 2018-19 to 2025-26
- The Advanced Learner Loans RAB charge is 67%. While Advanced Learner Loan borrowers typically take out smaller loan amounts than higher education loan borrowers, they are also expected to have comparably lower future earnings than higher education loan borrowers. A proportion of the loans are also cancelled early, as students that receive a loan while studying for an Access to Higher Education Diploma will have their loan balance cancelled if they go on to complete a higher education course.
- Master’s loans have a RAB charge of 0%, meaning that it is expected that the overall net present value of borrowers’ future repayments will be at least as high as their initial loan outlaypared to the other loan products, master’s loan borrowers generally receive smaller loan amounts than Plan 2 borrowers, and are expected to have higher earnings. They also have a lower repayment threshold than Plan 2 borrowers (?21,000 in 2020-21) and a higher interest rate of RPI+3% that will result in many of them repaying a larger amount. The Government announced that the repayment threshold will remain fixed at ?21,000 in 2021-22.
- The Plan 1 stock charge is 38%. This covers loans issued to students that started courses between academic years 1998-99 and 2011-12, which have not been repaid in full by the start of 2020-21. It is lower than the Plan 2 higher education stock charge as these borrowers took out smaller loans and have a lower repayment threshold (?19,390 in tax year 2020-21). This is despite Plan 1 having a lower interest rate and entrants from 2006-07 having their loans cancelled 25 years after they become liable to make repayments (compared to 30 years under Plan 2).
- These figures do not provide a direct comparison of the overall level of Government subsidy provided to the higher education sector under each system, as the Plan 1 system also involved a higher level of teaching and maintenance grants than the current Plan 2 system.