Student loans now dwarf every other UK government investment combined
Key Points
- The Student Loans Company holds £151 billion in loans as of March 2025
- Student loans make up 74% of the Government's total loan and equity portfolio
- Treasury rules explicitly permit loss-making investments, with student loans the clearest example
- UK Government Investments estimated a 1.9% gross return on part of the portfolio in 2024/25
- Four PuFins now hold nearly £200 billion in total balance sheet capacity
The Government’s student loan book has grown so large it accounts for 74% of the entire value of the state’s loan and equity portfolio, dwarfing every other public investment combined, according to a new Resolution Foundation report.
The Student Loans Company held £151 billion in loans as of March 2025, per UK Government Investments’ Financial Investment Report.
That single portfolio outweighs everything the British Business Bank, National Wealth Fund, National Housing Bank, UK Export Finance and British International Investment hold between them.
The figure comes from the Resolution Foundation’s report on the UK’s public financial institutions, the six bodies HM Treasury has formally designated as “PuFins” and judged capable of managing large-scale, high-risk financial transactions.
The list covers the British Business Bank, British International Investment, the National Wealth Fund, UK Export Finance, the National Housing Bank and, less famously, the Student Loans Company.
Why student loans count as an investment
The SLC’s inclusion follows from how the government now measures its own finances.
Since Rachel Reeves rewrote the fiscal rules in October 2024, the primary debt measure counts illiquid financial assets such as loans against public liabilities, so a loan to a graduate sits on the books as an asset in the same way as a loan to a wind farm.
That treatment makes student loans the state’s largest financial investment by an enormous margin, even though nobody designed them to make money. The Treasury’s Financial Transactions Control Framework, which governs how PuFins invest, demands that financial investments target returns matching or exceeding the cost of government borrowing, but it explicitly permits deliberately loss-making transactions where they serve policy aims and address market failures.
The Resolution Foundation calls student loans “the clearest example” of that exception.
The data suggests the wider portfolio earns thin returns. UK Government Investments estimated an annual gross return of 1.9% in 2024/25 on a subsection of the government’s holdings, a figure the report cautions against comparing with current gilt rates because the state made many investments when borrowing costs sat far lower.
The £200 billion question
The Resolution Foundation warns that the scale matters because the government keeps expanding the PuFin model.
The Starmer government raised the balance sheet capacity of four institutions by over £100 billion, taking their total to nearly £200 billion, and the Resolution Foundation urges Prime Minister Andy Burnham to go further by nearly doubling the National Wealth Fund.
An additional £1 billion of borrowing costs the Government around £50 million a year in debt interest, which the current budget must cover unless investment returns fill the gap.
The student loan book demonstrates both sides of the model. It shows the state can run a vast financial portfolio for policy reasons rather than profit, and it shows how quickly a “financial asset” can come to dominate the national balance sheet while generating returns nobody would accept from a commercial lender.
As ministers lean harder on financial transactions to fund investment, the £151 billion sitting in graduates’ debt offers a reminder of where that road can lead.
