The student loan sell-off: what is it and why should you care?
The government has formally announced a £900m sale of 1990s student loans, with a view to eventually selling off the whole stock, believed to be worth some £40bn. It’s an issue that requires a rigorous understanding to get the finer nuances of, and is considerably more complex than the most recent major national student issue; the trebling of tuition fees. But there are some very simple conclusions to be drawn out of it- it’s being done with no mandate and in spite of some mealy-mouthed ‘guarantees’ from government spokespeople, does risk soaring interest rates.
The rhetoric of cutbacks has consistently been based on the idea of tightening our belts for the future, of short-term pain for long-term gain. And yet despite a sweeping cuts offensive that has seen everything from universities to youth centres to police stations to post offices and hospitals axed or sold off, public finances are still not in order and signs of growth remain defiantly tenuous. So once again, rather than admit the need for a Plan B, our elected representatives resort to gambling. With education in particular, that has been their strategy. When they raised the cap on fees and slashed university budgets and yet were somehow surprised when almost all universities started charging the maximum fee level, the response consisted of every means of damage control possible short of admitting a mistake. They talked about charging international students more, they cut places and then reallocated them in a humiliating lottery between the post-1992 universities, they stepped up the longest sustained reduction of staff pay since the Second World War and now we’re at the point where our Vice-Chancellor can talk seriously about the possibility of fees soaring to £16,000 per year.
Their response now escalates into a carnival of ideological fundamentalism involving selling things off purely for the sake of selling them off, and gaining a stack of money for the public purse regardless of future consequences (exactly what the left have been consistently accused by them of doing). The loan book remaining in state hands would benefit the government far more in the long term, by selling it off they deprive future governments of considerable amounts of money. But because of the long-term nature of the debts, they are unattractive to most private agencies. Hence sweeteners would have to be added to the deal. There are two conceivable potential ones. The first is state subsidies to the buyer, which seems utterly illogical. The second (and more likely) potential is lifting the interest rate cap, something which there is a precedent for in New Zealand. Our supposed national leaders in the NUS claim they have extracted a guarantee from the government that interest rates will not be allowed to rise. What they actually got was the repetition of an old press release, one which in spite of its clever wording does not preclude the possibility of changing interest rates. Over the summer, a government-commissioned Rothschild report, the so-called ‘Project Hero’, was leaked. It consisted of a plan to raise interest rates on student loans, complete with a party line and press releases to respond to angry graduates.
This is something that affects all students- former, current and future. But it also provides us with a platform to raise more general points about the dire nature of the student finance system. I don’t just mean that Student Finance England are essentially the proverbial monkeys with typewriters and have a penchant for running up your phone bill with their 0845 number as you listen to tinny music before being told that they can’t actually deal with your query. They continue to assess your claim on the grounds of family income, assuming that anyone who is above a certain income bracket automatically must receive a set amount of money from their parents. And yet even the loan/grant package for the poorest is nowhere near enough to cover the year, making students reliant on temporary employment. If you can’t find a job (not a strange thing in modern Britain) then you’re certainly not permitted to claim benefits. Meanwhile the ability to study for a postgraduate degree remains dependent on wealth or access to scholarships, despite even relatively pro-Coalition thinktank CentreForum arguing that it’s time for a national postgrad loan scheme.
So let’s get active in trying to stop the government selling off our debt and putting our futures on the line. Because as we know from the thirteen-year move from £1k to £9k fees, the sell-off of part of the loan book is likely to be only the thin end of the wedge. And yet we must provide an alternative, not be constantly in opposition. I think that should be a system that recognises the value and contribution of education to society, and gives students and university staff (academic and nonacademic) the respect and fair funding they deserve.