Lords query loan law plans

PEERS have questioned apparent contradictions between the government's proposed legislation for selling off existing student loan debt and that ushering in income-contingent loans and tuition fees.

The Lords have asked the government to explain exactly how the Education (Student Loans) Bill will operate in conjunction with the new Teaching and Higher Education bill which repeals it as soon as it becomes law.

The Student Loans Bill allows for the sale of existing loan debt to the private sector. It contains certain safeguards, including those protecting student borrowers from future private sector purchasers who may wish to step up debt collection procedures. Peers, attending the committee stage of the bill in the Lords last Tuesday, were worried that these safeguards could be lost.

Conservative peer Baroness Blatch asked education minister Baroness Blackstone where in legislation the protection would lie. Baroness Blackstone said that certain elements of the Student Loans Bill would remain in force until the last student on the existing loans system had "gone right through the system". But she told Baroness Blatch that she had no further details and that she would write and clarify the situation.

Liberal Democrat peer Lord Tope moved an amendment which attempted to limit the amount of subsidy the government will pay to the future purchaser of the existing loan debt to compensate for default and deferment. Lord Tope wanted to limit this amount to a quarter of the total loan portfolio estimated at Pounds 3.1 billion over two years. He was told by Baroness Blackstone that this would be damaging to the competitive bidding process in the sale. Lord Tope withdrew the amendment.

* Three consortia and one company are bidding to buy the loan debt. They have around three weeks to submit their bids to the government.