Selling-off the loan book would be the government’s most outrageous attack on students yet, so why aren’t we more concerned?

It shouldn’t be left up to ordinary students to organise against the privatisation of the student loan book. We both need and deserve better from NUS.

Student loan book

What could be more outrageous than the undemocratic trebling of tuition fees, or the fundamentally anti-working class policy of scrapping EMA, denying thousands of poorer students their chance at further and higher education?

After the attacks on FEs, raising fees for adult learners and axing half a million places, where could the coalition sink next?

The sell-off of the student loan book to private companies is like a bizarre thought experiment in how to invent an unjust policy without democratic mandate.

Imagine a policy that would retrospectively increase tuition fees, move a huge sum of public debt into private hands, cost the government money in the long-run, and plunge students into even higher debt.

Just as some called the privatisation of the Royal Mail an example of an industry that should never be privatised – profit-making, natural monopoly, excellent public service – the sell-off of the student loan book is the latest attack on students from a government that have taken so much and given so little in return.

The government has confirmed this policy, and also commissioned a report by the Rothschild bank called ‘Project Hero’, which explained how the policy will raise £10bn of cash in the short term.

According to academic and education analyst Andrew McGettigan, this can be done in one of two ways.

Firstly, the government could offer a guarantee to private investors, called a ‘Synthetic Hedge’, where public money backs private investment: a PFI for your loans, if you will.

The second option is the more nightmarish: the government will remove the cap on interest rates in your loans, allowing companies who buy your debt to crank up the loan repayments retrospectively. This is the stated intention of the Rothschild report, and it should be considered as government policy.

Speaking to a parliamentary select committee last June, universities minister David Willetts told MPs:

“In the letter that every student gets there are some words to the effect that governments reserve the right to change the terms of the loans.”

How appropriate that Willetts was on the receiving end of a banner-drop at the Oxford Union two weeks ago. If only some graduates, who are likely to see their fees effectively raised by this policy, could have joined us in the Union to express their completely understandable feelings of disgust through the ‘Fuck You Willetts’ banner.

This policy has worried many of the more politically apathetic students I have explained it to. But why should it not, when it will take money out of their pockets? If changing the terms of a student loan sounds like something that not even this government would consider, then take the example of New Zealand, who recently retrospectively changed the interest rate on student loans from 10 to 12 per cent.

We wouldn’t accept this sort of behaviour from a commercial loan, so why should we accept it when it comes from the Student Loan Company?

Yet accepting it is exactly what our student leadership have done. The president of the NUS, Toni Pearce, in a recent blog post that celebrated her ‘win’ on this issue, wrote:

“We are pleased to report that our pressure paid off. David Willetts has subsequently written to us to confirm that the government will not change the method of determining interest rates for those borrowers who took out loans prior to the introduction of the 2012 funding system.”

How reassuring to know that the NUS president can influence government policy through having coffee with the Tories!

NUS’s stance is not inconsequential. By claiming that the issue is settled, the NUS are pouring water over any attempts to agitate and organise students to fightback against seeing their loans fall into private hands and their tuition fees retrospectively hiked.

Thankfully, both the Student Assembly Against Austerity and the National Campaign Against Fees and Cuts, both of which I am a member, are holding a Day of Action on the 20th November.

It shouldn’t be left up to ordinary students to organise over this. We both need and deserve better from NUS.

12 Responses to “Selling-off the loan book would be the government’s most outrageous attack on students yet, so why aren’t we more concerned?”

  1. Robert Kaye

    What a bonkers article. It starts by detailing the Government’s plan to continue the last government’s policy of selling off the student loan book. It says that this would be outrageous because this would involve retrospectively raising interest rates (which, just it was suggested in a report commissioned from outside agency we are told must be ‘considered government policy’). It then goes on to detail how successful lobbying by the NUS has led the government to confirm that it will not retrospectively increase those rates anyway (so actually it probably shouldn’t be considered government policy after all, seeing as it’s been officially ruled out).

    Rather than congratulate the NUS for doing what stopping what it suggests would have been outrageous about the scheme it then attacks the NUS for achieving an outcome which deprives students of the opportunity to agitate over two things – one of which, retrospective increases, they can’t agitate over because it won’t now happen. Which sort of suggests that the agitation and campaigning you were looking for is synthetic, ideological and bogus.You’d rather the government press ahead with doing the wrong thing so you can have a fight over a wider issue where your case is less clear cut.

    You are the very model of a student politician.

  2. The World

    You’re living in a fantasy land where policies are voted for rather than parties in a democratic system.

    EMA was flawed in the way it also funded the drink/drug habits of the middle class youth whereas the new bursary system ensures money goes only to those truly in need and for goods which facilitate a student’s education, since it is now the responsibility of schools to check receipts.

    I wish people like you would stop perpetuating the myth that increased university fees hinder students from poorer backgrounds from going to university – the Student Loans Company provide students with proportionate loans and grants, which are only to be paid back when the graduate is earning an income of at least £21k.

    I could go on and on, you left-wing nonce!

  3. S.r. Williams

    I think it’s offensive to brand someone a nonce just because you disagree with them (as well as exposing the weakness of your ‘arguments’).

  4. S.r. Williams

    The important thing is that it remains a graduate tax in all but name – if it becomes a private loan like in America (where parents have to take out life insurance on their adult children in case they die and they inherit their loan) that truly is nightmarish. I’m glad to see the fight is continuing.

  5. S.r. Williams

    Governments cannot bind their successors – there is nothing to stop the government from continuing Brown’s policies (other than the fact they agree with them).

  6. lee elliott

    How will making the cost of something higher make it easier to pay for if you have less money? Does English-conservative thinking rot the brain? Do Germany, with a better economy, treat their youngsters this way? Is there even any point asking tories these questions?

  7. lee elliott

    There is nothing ‘bonkers’ about this article at all. You are an apologist for tories. You have not analysed the article in the least. You are here to bash, confuse & sweep that tired old we-know-best wash over things because you fear the hatred your existence provokes. You are a fading force. Milton Freidman was a deluded nostalgia-drunken misfit whose insanity will drag us into the 19th century if articles like the above cease to appear. Good work James, ignore the above. He’s here at the behest of his masters.

  8. DanFilson

    I am not sure I would get het up about the sale of the student loan book provided, a big proviso, the terms of the loans do not deteriorate. After all, did you know mortgages taken out with a building society were bundled up and sold on, so that the building society could then re-lend to fresh borrowers, whose mortgages would then be bundled up and sold on, and so on, such that the same amount of money deposited with the building society could in effect be lent several times over? I had no idea until the world banking crash happened for just this reason.

    So there’s nothing to fear … or perhaps there is …

  9. HurrDurr

    James what did you get at A-level economics?

  10. Kryten2k35

    Right, but in the hands of private companies, there WILL be dramatic changes to the system. Repayments will go up, interest will go up and it will be a lot less flexible.

    The current system is appealing because it enables poorer people to go to University and good terms. Any changes that privatised this would serve to make profit, not enable anyone.

  11. James Elliott

    A* 🙂

  12. andybrice

    So, key question:

    Are the repayment terms of existing student loans legally binding? Or does the contract allow for the debtholder to change them retroactively?

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