The Government has today kick-started the sale of pre-2012 student loan debt and has been quick to dismiss concerns the process could negatively impact graduates.

In a meeting with the Department for Education (DfE), MoneySavingExpert.com founder Martin Lewis had asked for clarity on what safeguards would be put in place to avoid a repeat of the issues that have dogged the purchase of the pre-1998 student loan book by Erudio Student Loans four years ago.

The DfE has now moved to reassure graduates there will be "no impact" on their debts or the way they repay ahead of a planned Government sale of the next tranche of the student loan book.

First to be sold off under the privatisation of the second student loan book will be loans which entered repayment between 2002 and 2006. This is expected to be the first of a planned four-year programme of sales of loans issued before 2012, which is expected to return £12 billion to the Government's coffers.

Upon hearing of the Government's intention to sell off this latest batch of student loan debt, Martin contacted the DfE seeking assurances that guarantees could be made that:

  • There will be no change to forms or contact methods for those with loans – they will still be dealt with by the Student Loans Company (SLC).
  • There will be no change to the fact that student loan repayments do not go on credit files.

Today, in response, the DfE has promised it could offer "reassurance on both points".

Matt Toombs, director of student finance and analysis at the DfE, says: "The Government has made it clear that there will be no impact on people whose loans have been sold as a result of the sale, and that sold loans will continue to be administered in the same way as equivalent unsold loans.

"Therefore as a result of the sale customers whose loans are sold will see no changes to the way they repay their loan. The Student Loans Company will continue to administer customer loans and will be graduates' point of contact for all matters relating to their loan account. They will continue to receive annual statements from SLC as usual. The sale will also not affect borrowers' credit reports."

Read our Student Loan Mythbusting guide for help on everything to do with student loans.

'I hope it won't have the same damaging impact as the last tranche's sale'

Commenting on the sale of the student loan book, Martin says: "The sale of the pre-1998 student loan book has had a near-disastrous effect on many. It wasn't the change to the terms and conditions that caused the problem, but the operating procedures when Erudio took over.

"Issues such as wrong deferment forms, wrong processing of deferment forms and most crucially for the first-time student, loans being put onto credit reports, caused much distress, pain and worry for many of the people with those loans.

"I've had meetings with the Department for Education on this and while I do have concerns over the sale of the next loan book, they are at least making the right signals that the same mistakes won't be made again.

"So while I would not go as far as welcoming this sale, I hope it won't have the same damaging impact as the sale of the last tranche – but it is a question of watch this space to see if their rhetoric is matched by their delivery."

What's gone wrong under Erudio's watch?

Erudio manages about 250,000 student loans in total, taken out by those who began courses between 1990 and 1998.

However, the company has consistently made headlines for the wrong reasons since its 2013 purchase of the pre-1998 student loan book. MoneySavingExpert has called the company to account on a string of blunders in recent years, with issues including:

What will happen to post-2012 student loans?

The third and final tranche of student loans (those taken out after 2012) is already being sized up for a future sale by the Government.

Responding to a Treasury Committee question in December by Labour MP Wes Streeting, who has been campaigning alongside Martin for the Government to stop retrospective student loan changes for post-2012 loans, Chancellor Philip Hammond used the fact that the Government was "preparing the student loan book, ultimately, for sale as an asset sale" as an excuse for not reversing the threshold freeze.

Hammond's admission came hot on the heels of Martin accusing the Government of behaving like a "payday lender" following its rejection of amendments tabled by Streeting to the Higher Education and Research Bill. These would've served to stop the Government from behaving like this in future and making retrospective changes to student loan agreements once they've been made.