To a large extent the government has reduced spending on education thus pushing up the budget surplus, then lent that surplus back to students at a high interest rate. Students then spend it on education. Nothing much real has happened but this sleight of hand allows the government spending figure to be lower. Costs are shifted to students, not reduced for society as a whole. On the balance sheet, net worth of the Crown rises and net public debt falls giving the illusion of achieving improved fiscal responsibility .
Net debt is gross debt minus cash-like assets.
Believe it or not, loans to students are netted off against gross debt along with cash as if they are secure, matching financial assets. As the surcharge is not counted as a tax, the scheme allows taxes to look lower as well. It can be argued that we are witnessing a massive redistribution from young poor students to the middle-aged and older wealthy age group. Those on lower incomes already face longer repayment periods and higher total interest costs. Any increase in the interest rate disproportionately increases repayment times for low-income earners.