Student loans shouldn't be sold off - let's protect them
In November 2013 it was announced that part of the student loan book was being privatised. £900 million worth of student loans made between 1990 and 1998 were sold off. The loans were sold to Erudio, a company which has been criticised since for its handling of the debts.
The coalition government planned to sell off student loans made between 1998 and 2012 as well, but Vince Cable decided to abandon the sell-off plans in July 2014 - so these loans are still in public hands.
Now, the rest of the student loans book is at risk of being privatised - part of the government's plan to sell off £31 billion of public assets. The remaining loans are thought to be worth £12 billion so this is the biggest single public asset up for grabs. In 2015, Business Insider reported that 'almost a year after his first attempt was torpedoed by Vince Cable, Chancellor George Osborne is having a second go at privatising 14 years' worth of student loans.'
What you need to know
What the sell off means for students, and anyone who has graduated in the last 15 years, is that interest rates could rise (although the government has ruled this out – it is not inconceivable). This would force graduates to pay more back - despite lower wages and lower job prospects for many. In addition, we are all likely to lose out in the long term, because of the terms and conditions of the expected sell off (if the sale of older student loans are anything to go by). Clauses are introduced that mean there's little risk to the companies involved, while the public is forced to compensate the buyers of the loans if repayments are lower than expected.
- In the late 1990s, the Labour government sold two tranches of student loans for £1 billion each.
- Today, the government is £240 million worse off than if it had kept those loans in public ownership.
- 64% of us want the student loan book to be in public ownership (Survation, 2015)
Martin Wolf from the Financial Times described these previous sell offs of student loans as ‘economic illiteracy’. Read more about this in Andrew McGettigan's essay 'Cash Today' for the London Review of Books.
What is the future for student loans?
Whilst the future for ownership under May's new government is uncertain, the Treasury's Budget - announced earlier this March - has indicated their intentions to continue the sell off:
"The government is making progress towards achieving a further £5 billion of corporate and financial asset sales by March 2020... the government is continuing to pursue the sale of the pre-2012 income contingent repayment student loan book, with a first sale in 2016-17"
What can you do?
- Take action with the NUS - ask your MP to stop the sell off.
- And if you know any students - or ex-students - tell them to do the same!