Student Loan Repayments ModellingValuing the student loan book

HE Analysis

Background

• The RAB charge• Higher Education reforms – Browne review• HERO model

StEP model - Phase 1

• For ShEx loan sale work• Older cohorts• Hot start only - straight into steady state• BHPS data on graduate population• Regressions using historical data• Completed Oct 2013

Back testing StEP1

StEP model - Phase 2

• Cold start - where we have no repayments data

• Warm start - where we have some data• Requires a power up to get to steady state• Use of SLC admin data to initialise model –

recent graduates not like general graduate population

• Methodology used for BIS accounts (provided NAO agrees)

Start up process

Year 2: wage(2) = a + b*wage( 1) + c*age + d*HE level

Year 3: wage(3) = e + f*wage(2) + g*wage(1) + h*age + i*HE level

Year 4: wage(4) = j + k*wage(3) + l*wage(2) + m*wage(1) + n*age + o*HE level

Year 5: wage(5) = p + q*wage(4) + r*wage(3) + s*wage(2) + t*wage(1) + u*age +v*HE

Year 1: 0% 50% 100%

Start up process

Year 1 0% 50% 100%

Year 2 wage(2) = a + b*wage( 1) + c*age + d*HE level

Year 3 wage(3) = e + f*wage(2) + g*wage(1) + h*age + i*HE level

Year 4 wage(4) = j + k*wage(3) + l*wage(2) + m*wage(1) + n*age + o*HE level

Year 5 wage(5) = p + q*wage(4) + r*wage(3) + s*wage(2) + t*wage(1) + u*age + v*HE

Back testing StEP2

Further work

• Quality assurance• BIS accounts• NAO audit• Future work programme