10 reasons why the privatisation of student loans is a really bad thing
Towards the end of last year, the Government officially announced long-rumoured plans to sell off the rest of the student loan book. The plan to shift this public asset into private hands was finally revealed and means that, from 2015, the money that we thought we were borrowing from the Government to pay for our public university education will start to flow straight to private financial institutions.
Although the move was a surprise to many people, hindsight, freedom of information requests and parliament records tell us that it was in fact years in the making. They may have kept fairly quiet about the entire process, but in November last year the Tories also finalized the sell-off of the pre-1998 loan book. And just months before that, the Guardian, in conjunction with False Economy, obtained a confidential report which looked at how the coalition could privatize the pre-2012 loan book.
In spite of politicians’ attempts to pass off the sale as just one more step out of the sticky national debt (“austerity”, as they call it) like the privatisation of other public assets, such as the Royal Mail and the NHS, selling off the student loan book will undoubtedly have dire long-term consequences.
These are just some of the reasons why, as students, voters, taxpayers and citizens, we should all care about the shifty sell-off of the student loan book. After all, and as David Cameron himself has said on more than occasion, we’re all in this together.
We were never really given the choice for the terms to be changed.
Fine. We get it, David Willetts. You’re right; when we signed those forms from the Student Loans Company to borrow money from the Government to be able to go to university, we technically did give our permission for the terms of those loans to be changed. So, yes - as you, and many others have pointed out, if we disagreed with it, we could have chosen not to sign the form, and hence not given permission for the terms to be changed.
However, had we not signed the form, most of us would not have been able to afford to go to university at all. Ergo, there was not actually a choice.
We could be paying loans back until we retire
Currently, there is a cap of 30 years on the amount of time a graduate can spend paying off their student loan. However, because the terms can be changed, graduates could be paying off their student loans until they retire.
There is also a cap of 1.5 per cent on the repayment rates for student loans taken out before 2012. If the terms are changed, the new rate could soar to 3.6 per cent, bringing it in line with RPI, making debt even harder to pay off.
The sell-off could actually be worse for the taxpayer
The aforementioned secret report suggested that the government could offer financial “sweeteners” to attract buyers. This includes a financial “synthetic hedge”, whereby the taxpayer effectively becomes a guarantor for the loans to make up for potentially low interest rates.
The previous loan book was sold for less than it is worth
The ironic thing about the student loan sell-off is that the Government isn’t even doing it particularly well.
The pre-1998 loan book was worth £900m by some estimates, but it was sold to a private debt collector for just £160m.
Even in the long-term, the sell-off is financially dubious
As a public asset, the Government currently earns a fixed income from student loans. However, along with the discrepancies about how much profit the privatization of student loans will actually produce in the short-term, the Government will also sacrifice some future income through the sell-off.
The sell-off is clearly part of a political agenda
With the 2015 general election fast approaching, the sell-off must be viewed in the context of the Coalition’s short-term political agenda. The privatization of public assets is part of a strategy to reduce public sector debt and improve the national balance. This functions in line with so-called austerity measures, which will make the Tories look as though they are doing a good job at getting us out of the financial crisis.
There has been a lack of transparency in the whole process
The fact that False Economy and the Guardian had to obtain the confidential Rothschilds' report through a freedom of information request; that 90 per cent of it was blacked out when they finally did get hold of it; and that as citizens we have actually heard very little about a process that will affect us all, is incredibly undemocratic.
The sell-off is part of a wider assault on students and the education system
In this era of education cuts, tripling fees, poor working conditions for university workers, low rates of pay, and the privatization of the student loan book, we would be forgiven for wondering whether our Government is actually unleashing all-out war on students and the education system.
The lack of financial security could deter even more students from applying to university.
The increase in tuition fees has already led to a reduction in the number of people applying to university. The sell-off of the student loan book will also deter applicants who are already unsure about their financial security at university and beyond.
We are not happy about this.
In November last year, the Student Assembly Against Austerity organised a national day of action. The NUS has taken a stand against the measure, and last month activists on campuses from Exeter to Edinburgh took part in a national week of action. 50 MPs have signed an Early Day Motion publicly condemning the move.
Because we live in a democracy, our elected politicians should be answerable to us. If the sell-off goes ahead, it constitutes a break from this, because our voices have been ignored. Democracy is not made up of decisions that take place beyond our knowledge and our control; if politicians really want to win us over in time for next year’s election, they must include us in the conversation.
If you feel disillusioned with Westminster politics, why not head to the Manchester iStudents Debate at Manchester Town Hall tomorrow at 6pm? To sign up, visit ind.pn/imanchesterdebate
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