Dr. Shaen Corbet:

We have made the assumption that everybody who graduates at this time has 20 years of service to give and will be in employment for 20 years. The 20-year models were selected due to evidence based upon the most likely period of debt securitisation, which is the process commonly used in other jurisdictions such as the UK. We have implemented an expected loss methodology upon these forecasts based upon the proportion of the loan book that would be repaid over 20 years.

The expected loss is calculated as a function of the graduating estimate of €18,000 owed, which is calculated as €3,000 for four undergraduate years in university and €6,000 for one postgraduate year. We then built our ICL model on these forecasts, applying similar repayment thresholds and replaying categories such as those found in the UK ICL system. Once salaries reach the income-contingent level of €25,000, we assume the student will then proceed to repay the loan. We estimate the methodologies upon the repayment of 10% of gross income being repaid to the ICL upon an interest rate of 1.5% on income in excess of €25,000 and 3.5% on income in excess of €45,000.

Our decision to present our estimates excluding grant recipients was based on our stakeholder consultation to date, which has presented considerable opposition to any changes in the grant structure. Our methodology incorporates the estimated graduate emigration and incompletion rates as provided by multiple sources, including individual universities and the HEA. We estimate that the top five ventiles or 19.8% of students will achieve break even within 20 years. We accept that this group will generate a profit over the period. However, we find that the expected loss of the lowest ventiles, 19 and 20, is more than 98%, incorporating 5.7% of the graduating students. These would be considered to be lowest earners upon graduation.

We also present our estimates for profit and loss within the proposed ICL system. We can clearly observe that, outside the grants paid by governments each year, the system would necessitate annual liquidity provision of between €600 million and €700 million for the first seven years. However, we find the system would reach a break-even point at year 18 where it would return a profit after reaching an estimated running loss of €7.1 billion. These estimates are completed under the assumption that the economy continues to grow unaffected between the start up of the ICL and the break-even point.