Amongst the diverse range of public assets to be privatised by the Coalition Government (these include Royal Mail and NHS Plasma Supply), Student Loans is the latest target by which the government is attempting to raise revenue and boost investment. With Ed Milliband appearing as Prime-Ministerial as ever (thanks to his well-delivered speech at the Labour Party Conference), the Conservative Party needs all the help it can get to claw itself back into the public’s good graces. Thus, the proclaimed intention behind the privatisation of the Student Loan Book, worth around £15 billion, is to increase employment and prosperity of the electorate.
In a statement to the House of Commons in June, Chief Secretary to the Treasury and whipping-boy, Danny Alexander, justified this particular case of privatisation on the basis that the government is looking to prioritise long-term national interest over short-term convenience. Considering that the Conservative Party are famed for their stand on the principle of privatisation, his statement is a skewed perspective on an otherwise transparent issue. The privatisation of the Student Loan Book not only generates instant revenue to meets short term goals, in comparison to a revenue stream spread over decades, but tax payers will have to suffer incremental interest rate hikes of 1.5% to 3% on loans agreed between the years of 1998 through to 2012. This will be due to the Government offering ‘sweeteners’ to potential buyers. This is the more salient and pressing issue of this privatisation, as not only would tax payers be paying off student debts for a longer period of time, a bitter pill for many to swallow, but it also indicates the potential of interest rate hikes on student loans in the future.
Although the current president of the NUS, Toni Pearce is confident that the government may soon confirm that current graduates will not face an incremental interest rate on pre-existing loans, politicians are hardly famed for their drive towards truth and justice. In a strange twist of fate, the Liberal Democrats, who happen to be at the forefront of these set of proposals, are the very same party who promised to scrap tuition fees in the 201o elections. They have undermined their own set of pledges through a sheer lack of backbone and a thirst for power. Although it is useful to be aware of the government’s ‘commitment’ to not raising interest rates on existing student loans, it would also be a useful endeavour for students and the public to galvanise interest and publicity on these set of proposals. The instability of Student Loans in the hands of a private company is worrying, so this would be important.
It’s worrying to know that a private company can at any time increase interest rates on loads, and perhaps even on already agreed loans. On this basis, it is not subject to any form of legislation regarding the percentage of interest rates placed on loans. Moreover, if considered from the perspective that this instability has the potential to put working class students off applying to university, it becomes a more polemical issue. Like all other students, working class youths face incurring a debt of more than £27,000 on tuition fees alone. Living expenses are additional to this of course. To topple this debt with a high interest rate is a damaging and daunting prospect for any student whose parents do not earn this amount annually. This will lead to universities not only further becoming hot beds for the middle classes, but will also undermine the notion that education can be a means of social mobility.
Higher education is one of the most effective and efficient ways in moving up the class ladder, and to use it as a tool to further political ideology without considering its negative social effects is alarming.