A researcher must understand these differences in order to understand the role that a particular kind of debt plays in household decision-making. But student debt is perhaps the most distinctive form. Let me explain what I mean. Unlike virtually all other forms of credit, student loans are generally not underwritten: they are frequently offered to young borrowers who have little or no credit history and little to no current income. The amount of credit extended, on average, runs in the tens of thousands of dollars. These loans are also not collateralized, nor are the interest rates risk-based. However, lenders (now primarily the taxpayers), are given additional security in that student loans, unlike other forms of debt, are not dischargeable in bankruptcy. This also means that delinquent student loans tend to remain on a borrower’s credit record long after the borrower has stopped making payments, thus leading to very high measured rates of delinquency. In addition, many special programs exist to allow borrowers to postpone repayment on their student loans to an extent not available for other kinds of household lending. New York Fed economists have shown that for the 2009 cohort of graduates, only 17 percent of their original debt had been paid down after five years.1 More than 20 percent of high-balance student borrowers owe more now than when they graduated in 2009. For the 2005 cohort of graduates, only 38 percent of their original student debt had been paid down, on average, nearly ten years after graduation.
Unfortunately, I cannot readily assess the level of support for the particular option which the Government have now chosen, since the researchers did not ask you to assess it - which is certainly a tribute to the new Government’s ability to surprise the market. But in these surveys I am always fascinated by the outlying views - the small minorities who express a contrary opinion. For example, when asked about the most appropriate regulatory structure 2 per cent of those asked said they thought the best option would be to abandon the SIB and the SROs, and the Bank of England, and that regulation should be carried out directly by the Treasury. I would be very grateful if that 2 per cent of you could stay behind afterwards, assuming they have not been institutionalised since the study was conducted. BIS Review 67/1997  -2-  The strongest message to emerge, though, was the need for regulators to consult the market effectively on both structures and on rules. I am certainly prepared to undertake here and now that we shall do so. We are charged by the Government to produce an over-arching framework pretty quickly, so our discussions with the market will need to start now. But, thereafter, we will consult intensively on the way in which the new structure will affect day to day regulation. I give you my firm undertaking on that point. But, as I said, today I am not speaking to you as the Chairman of the SIB.