The Tories sell students short

Jia Hui Lee, CUSU Education Officer 7 February 2014

The student loan book sell-off in November last year, which involved selling all remaining student loans taken out before 1998, was defended as a financial management decision. Firstly, selling off the student loan book reduces the national deficit. Secondly, it was argued that loan companies, rather than the government, are best equipped to collect and manage debts. Soon after the November sale, Universities Minister David Willetts indicated that plans are underway to privatise all student loans taken out up until 2012, the year when tuition fees went up to the maximum £9,000.

There is currently no legislation to ensure that the cap on interest is fixed and there is no clause in any contract signed by students that guarantees a fixed interest rate on loan repayment. Willetts has assured National Union of Students (NUS) President Toni Pearce that the cap on interest will not increase. Despite Willetts’ promise, he explicitly did not guarantee that interest rates on student loan debt will not increase. In effect, future students may have to confront a higher cost to attend university, even if (pray!) the £9,000 cap on tuition fees does not increase.

But let’s imagine that we put our faith in the current government and trust that interest rates will not go up. Should we still be worried? If the plan to privatise student loans up to 2012 goes ahead, the government will be in an awkward position. At current interest rates on student debt, which are below market levels, the loan book is unattractive to potential buyers. The government then has to either allow loan companies to raise interest rates on student debt or it can fix the interest rate but pay the companies the amount of money as if interest rates were at market levels, transferring the extra cost to the taxpayers. If this were to happen, it would mean that the government’s plans would profit private loan companies at the expense of students and taxpayers.

This week presents an opportunity for students to clearly voice their concerns and stop the further privatisation of public higher education. If you are worried about the future of your student loan repayment, CUSU and other student groups are working to make sure that we fix interest rates and that higher education remains accessible to all students. The more students who speak to our MPs and voice our concerns, the more likely that the loan sale will be carefully scrutinised and that we all will get a fairer deal.