Government Set To Sell Off Student Loans For £12 Billion Profit | Redbrick | University of Birmingham

Government Set To Sell Off Student Loans For £12 Billion Profit

Billions of pounds worth of student debt will be sold to private investors by the Government which could prove problematic for both students and taxpayers, as the marketisation of the education industry takes prominence

Students who took out loans before 2012 may now have to make payments to private companies instead to the Student Loans Company. A move that will mean private investors will be able to control the amount they take from students, with the likelihood being that students will suffer. The Treasury, however, will not as it is expected to gain £12 billion from the sale.

The NUS have criticised the government’s ‘ugly move’ on students, despite reassurances from University Minister, Jo Johnson that the changes would have minimal impact on graduates’ loans.

Sorana Vieru, NUS Vice President of Higher Education, said ‘Selling the loan book to investors is privatisation through the back door. It is outrageous that bankers will profit off the backs of graduates who took out loans because they had no other option.’

'It is outrageous that bankers will profit off the backs of graduates.'

Although it is thought that the money gained from the sales is likely to be less than the face value price, due to the fact that a huge proportion of student loans will not be repaid in full, the government will make a profit in selling the 2002/06 student loan book, which had a face value price of 4 billion in the 2014/15 financial year.

The move to sell the student loan book was thrown out by former business secretary Vince Cable in 2014 who thought it would not prove profitable enough to the Government. However, in the next year the Government plans to sell off loans taken out before 2012, valued at £9000 per student.

Estelle Clark, advisory board member for the Intergenerational Foundation think-tank condemns the move, calling it a ‘bad idea for students and taxpayers’. She commented, ‘students and graduate borrowers will be right to be alarmed by this announcement: their loans will be controlled by private purchasers whose legitimate intention is to extract as much money as possible from graduate borrowers.

‘The Sale of Student Loans Act 2008 allows student loans to be made worse for borrowers and there is a serious risk this will happen.’

‘the government has a track record of breaking its promises; its ‘press’ position cannot be relied upon’.

A major concern amongst financial experts is that although the Government has reassured students will not be made worse off by the sales, the Government has frequently broken its promises in the past. There is a likelihood that this could be the case with the selling of student loans. Clarke warns, ‘the government has a track record of breaking its promises; its ‘press’ position cannot be relied upon’.

Students in the UK have faced constant changes to the cost of their student loans which prompts uncertainty amongst the undergraduate population. Something that has been reiterated by the University and Colleges Union. The said, ‘this is a government that has already moved the goalposts on loan repayment to sting graduates with higher charges, so you can forgive our scepticism when the minister says people with student debts have nothing to fear’.

However, amongst the scepticism, both the Department for Education (DfE) and Director of the Higher Education Policy Institute, Nick Hillman have praised the positive outlook of the move. Hillman argues that by selling off student loans the Government will be forced to make payment agreements clearer in the future.

‘this sale will have no impact on people with student loans’

Universities Minister Jo Johnson has said that this is all part of the government’s plan to bring ‘public finances under control’ and that ‘this sale will have no impact on people with student loans’.

Nevertheless, UCAS has claimed that they have experienced a drop in applicants due to the financial burden placed on students, this new move by the government sparks fears that the situation will only get worse.

With Brexit added into the mix, Clarke ponders the impact the Government’s latest move will have on applicant figures: ‘As students and their parents begin to understand the impact of this, more and more people will shy away from university at a time when receipts from EU students are less certain because of Brexit’

There is still much uncertainty over the structure of the proposal though it is thought that investor groups would include insurers, pension funds and asset managers who would buy into the securitised student debt. The process would take several months and would be dependent on ‘market conditions’ according to the Government.

I am a French and Spanish student who loves to write bits and bobs, also the Editor of the Spanish section of the Linguist. (@themainemily)



Published

13th February 2017 at 10:00 am

Last Updated

12th February 2017 at 10:58 pm



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