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London - The British government has sold student loans with a face value of around £890m to a private debt purchaser for £160m, saying it was struggling to get borrowers to repay their debts.
The Department of Business said on Monday the sale to Erudio Student Loans covered loans to around a quarter of a million students who started courses between 1990 and 1998.
It said the sale would not affect the terms and conditions of the loans and that a private group would be better placed to "maximise returns".
Of the loans affected, 46% of borrowers were earning less than the repayment threshold, 14% were still repaying and 40% were not paying off the loans in line with their terms, the government said.
"The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160m," Universities and Science Minister David Willetts said in a statement.
The sale relates to the remaining 17% of so-called mortgage-style student loans. Two previous sales of mortgage-style loans in 1998 and 1999 passed 2 billion pounds to the private sector.
The sale of the loans comes hot on the heels of the government's public listing of the Royal Mail. Royal Mail's shares have rocketed by as much as 80% since Britain sold a 60% stake in October for 330 pence per share, sparking criticism from unions and opposition lawmakers that the banks set the sale price too low.
Erudio Student Loans is backed by a consortium led by investment fund manager CarVal Investors and debt purchasing group Arrow Global Limited.
Arrow Global said the deal would raise its student loan assets to over £1bn by face value, with the company seeking to purchase more in future.
The government has said it is looking into selling off all its outstanding student loan book, with a face value of around £40bn, but nothing has been settled as yet.
"This is an important step for Arrow Global towards delivering this year's financial goals and positioning the business for growth in future years," said Tom Drury, chief executive officer of Arrow Global, in a statement.
