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Student loan debt up for private sale

Student loan debt up for private sale

The government has started the process of selling more student loan debt to the private financial sector.

It has announced that loans made to students in England between 2002 and 2006 will be put up for sale – to be followed by other pre-2012 loans – with the aim of raising £12bn.

Universities Minister Jo Johnson said the sale would have “no impact on people with student loans”.

But the National Union of Students said it was an “ugly move on students”.

“It is outrageous that bankers will profit off the backs of graduates who took out loans because they had no other option,” said the union’s vice-president Sorana Vieru.

Selling student debt

The government has had a long-standing aim to sell the student loan book to private investors – with types of loans being sold in separate stages.

Over the next four years it aims to dispose of the loans from before 2012, when tuition fees in England were trebled to £9,000 per year.

The slice of loans now being put on sale – dating from 2002 to 2006 – have a face value of £4bn.

The government is promising that there will be “no changes to the terms and conditions” for borrowers – so that rates of repayment for former students will remain the same.

It means that interest on these student loans will become an income for private investors, but repayments will continue to be collected through taxation and the Student Loans Company.

The Intergenerational Foundation think tank has calculated that a student borrowing for three years’ tuition could pay back £54,000 – before debts are cancelled after 30 years.

The Universities Minister Jo Johnson says the sale of assets is part of the drive to bring “public finances under control”.

But he said it would “only proceed once we are satisfied that it represents value for money for the taxpayer”.

Repairing public finances

David Gauke, chief secretary to the Treasury, said it was the right time to start the sale process.

“This sale makes sense for taxpayers and will play an important contribution in our work to repair the public finances,” he said.

But John Pugh, the Liberal Democrats education spokesman, said: “The Conservative Brexit fire-sale is well underway, as ministers scrabble around to sell just about anything that isn’t nailed down.”

Earlier versions of student loans have previously been sold – but it is now approaching the point in which the bigger “income-contingent loans”, introduced in 2006 when fees rose to £3,000, will be the next in line for sale.

The National Union of Students attacked the sale as “economic illiteracy” and warned that it would begin a process in which loans would have to be made more attractive to private buyers – at the expense of student borrowers.

“It doesn’t just penalise students and graduates, it is taking money from the public purse which could and should be spent on services over the long term,” said Ms Vieru.

However, Nick Hillman, director of the Higher Education Policy Institute, said that there was much “misinformation” about the sale of loans, and the key issue was making sure that the taxpayer received good value.

“What the government is doing may make some sense,” said Mr Hillman.

“Why should it keep the loans forever on its books? Why shouldn’t the demand of pension funds for long-term income streams be satisfied if there are no clear losers? Why shouldn’t we look for imaginative ways to reduce the national debt?”

Consumer finance expert Martin Lewis welcomed assurances about borrowers not facing a negative, but cautioned: “It is a question of ‘watch this space’ to see if their rhetoric is matched by their delivery.”

Labour’s shadow education secretary, Angela Rayner, said: “This government never learn any lessons – this sale will do nothing to ease the burden of debt piled on students by the Tories who have trebled tuition fees and scrapped maintenance grants.”

Source: http://www.bbc.co.uk/news/education-38880809

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