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<p>Student loans are valued in the department’s annual accounts in line with the International
Financial Reporting Standard 9 and set out in The Government Financial Reporting Manual
which is attached.</p><p>Under which where future cash flows are discounted to measure
the fair value of a financial asset, this should be done using the higher of the rate
intrinsic to the financial instrument or the HMT discount rate. HMT set the discount
rate annually based on a 10 year rolling average of gilt yields. For student loans
the intrinsic rate would be the discount rate that gave a Resource Accounting Budget
(RAB) or stock charge of 0%, so the HMT discount rate is used provided the RAB charge
is greater than 0%. Should the HMT discount rate result in a RAB charge calculation
giving a negative value then the intrinsic rate is used instead, meaning that that
RAB charge will take a value of 0%.</p><p>The most recent forecasts for the student
finance system can be found here: <a href="https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2022-23"
target="_blank">https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2022-23</a>.</p><p>The
net present value of future repayments was calculated by discounting all future repayments
at a rate of RPI -1.3% per year until the end of financial year 2029/30, and -0.2%
per year from financial year 2030/31, to the same point in time as the loan outlay
or loan balance. This is the discount rate for financial instruments set by HMT in
2022 and is intended to reflect of the cost of government borrowing. The most recent
student loan forecasts using the 2023 discount rate set by HMT will be published at
the end of June 2024.</p><p>The department has carefully assessed the impact of changes
and published a full and comprehensive analysis in the Higher Education Reform and
Consultation Document Equality Impact Assessment, which is attached.</p><p>The student
loan repayment system under Plan 5 is progressive, with repayments being positively
correlated with lifetime earnings. The highest earners make the largest individual
contributions to the system overall, and the lowest earners are required to contribute
the least.</p><p>Lower earners, whether male or female, are protected. If a borrower’s
income is below the repayment threshold, they will not be required to make any repayments
at all. At the end of the loan term, any outstanding loan debt, including interest
accrued, will be written off at no detriment to the borrower. No commercial loans
offer this level of protection.</p><p>The department will continue to keep the student
finance system, including repayment terms, under review to ensure that it remains
sustainable and delivers value for money for students and the taxpayer.</p>
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