Loan repayments
The changes compared to the central Covid scenario used for the forecast presented in last year publication are mainly around medium term projections of the RPI and average earnings. The RPI and earnings projections converge to the pre-Covid figures in 2025-2026. The Bank of England base rate for 2025-26 and beyond is assumed to converge to the projected pre-Covid value by financial year 2040-41.
Higher 2020-21 RPI by 1pp followed by lower RPI until 2025-26. The decrease in RPI compared to the central Covid scenario is the highest in 2023-24 at -1pp. RPI affects discounting and interest rates of all loan types.
Higher earnings forecast in 2020-21 by 0.2pp, followed by lower earnings in the following years. The -22 is largest at -0.9pp until which it tapers off until the projections converge in 2025-26. Earnings growth impacts both individual earnings and the repayments threshold for Plan 2 loans.
Minor changes in the range of -0.1pp to the Bank of England rate over medium term. With the Bank of England base rate projected payday loans Tennessee to remain low, it is expected that the Plan 1 interest rate will follow the Bank of England base rate for much of the coming decade.
The relatively minor changes to the macroeconomic determinants between central Covid scenario and project and their convergence in medium- and long-term result in only small impacts on RAB charge forecast.
Loan outlay
The outlay forecast also makes use of the Economic and Fiscal Outlook forecasts. The RPIX projections follow a similar pattern to the RPI figures as described. The RPIX figure is assumed to converge to the projected pre-Covid value by financial year 2025-26.
The RPIX rate is forecasted to fall between 2021-22 and 2022-23. From 2022-23 the RPIX rate increases, before remaining steady from 2024-25 onwards. RPIX affects the uprating of all loan types.
Since last year’s publication, RPIX forecasts increased for 2021-22. However, across the years 2022-23 to 2024-25, the RPIX forecasts publication. There was minimal or no change to the forecasts for all other years.
SLC’s Early-in-Year Student Withdrawal Notifications publication () stated that SLC had not seen any increase in student withdrawal notifications in academic year 2020-21 compared to the two previous years. As a result, no changes to withdrawal rates have been made in the outlay model. In addition, no changes to expected study location due to the Covid-19 pandemic have been included.
Student entrants forecasts
Full-time undergraduate entrants eligible for tuition fee loans are forecast to grow 5.9% over the forecast period, from 406,000 in to 430,000 in . This is largely driven by growth in the 18-year-old population in England from 2021, as well as increased participation rates expected as a result of Covid-19 and HE policy changes.
DfE’s higher education (HE) student entrants model forecasts the number of full-time undergraduate England-domiciled student entrants to UK providers and EU-domiciled student entrants to providers in England. These are all student entrants, whether eligible for a student loan or not. A subset of these student entrants is then forecast as the population eligible for tuition fee loans from Student Finance England (SFE).
The provider types included are specifically: English higher education institutions (HEIs) and designated Alternative Providers (APs) registered with the Office for Students (OfS) as an Approved (fee cap) provider; HEIs in the devolved administrations. These providers capture the vast majority of HE full-time undergraduate student entrants to Approved (fee cap) providers and eligible for maximum annual tuition fee loans of ?9,250 see the methodology document for more detail.
