Last month, the coalition’s whipping boy Danny Alexander announced that the student loan book was to be sold off. You don’t have to look far to see that this will seriously damage confidence in higher education. Not only will the move be grossly unfair to everyone who already has a student loan, but it will also act as a financial deterrent for future generations of prospective students.
Firstly, the government should make clear what it actually means when it says ‘selling off the student loan book’. There are two ways they could go about privatising student loans: one is to privatise the entire student loan system. This would be a huge step towards letting the free market fun rampant in student finance. We know from looking at America where levels of student debt are over a trillion dollars that embracing a free market system is something we should avoid at all costs. The other possibility is existing student loans would be outsourced to private companies. While on the surface this looks like the more favourable option, this could also have damaging consequences. If the student loan book gets outsourced, it’s likely that the cap on interest rates would be removed to encourage companies who might want a slice of the action. Put simply, we’ll all face higher levels of interest on our existing loans and, as a result, a big increase the amount we owe too.
Those of us who already have student loans will lose out, as terms and conditions that we agreed to get the loan are now subject to change. But we’re not just going to have to endure our contracts being changed after we’ve signed them; we’re also going to have to find more money to pay off the interest on our loans. Whichever option the government goes for, the chances are that the money you pay towards your loan each month is going to increase. You’ll be paying more, for longer.
Privatisation will also have an effect on the choices future university applicants make. When they drew up these proposals, you have to wonder if the ministers involved seriously considered the barriers any new changes would throw up. England is already one of the most expensive places in the world to get a degree. The tripling of tuition fees has already forced many people to think twice about doing a degree. Leeds University has seen a significant drop in student numbers since the introduction of £9k fees, and they could drop further still if there’s an extra financial barrier to coming to Uni. Higher Education is the biggest vehicle for social mobility in this country. But proposals to sell off the loan book, coupled with the increase in fees will make it a tougher decision for anyone considering going to University. At least with the introduction of £9k fees, the Universities who charged over £6,000 were made to draw up access agreements stating how they would make their University more accessible. Yet the government have said nothing to suggest that the privatisation of the student loan book will go hand-in-hand with extended access agreements.
Ultimately, the plans to privatise the student loan book could have disastrous consequences for future generations of students, and impact terribly on those currently in higher education. We should all be angry with the decision to sell on the debt burden to those whose only real concern is their bottom line, instead of ours.