Monday, 2 December 2013
Student Loans Sell-Off - the shape of things to come?
The government has sold off £900 million worth of student debt to a private debt collection company for the sum of £160 million. Leaving aside the rights and wrongs of higher education being paid for through loans for a moment (but we will return to that very shortly) this exposes the accounting trick at the heart of student loans. Over-simplifying this somewhat (obviously there was interest on these loans, and they are all from before 1998) nearly £900 million pounds of government expenditure was labelled as loans, therefore not impacting on the Public Spending Borrowing Requirement or with the convergence criteria for joining that single currency with which we were once trying to converge. But in the end the government has got merely £160 million pounds of that back - less than 20%. David Willetts justified this sale by insisting that the private sector was best placed to collect the debt. If that is true of these early loans, why (in the ideologically-driven philosophy of this ConDem government) would it not also be true of loans since 1998, including those loans that people are taking out today?
People have repeatedly pointed out that most of the loans being taken out today will never be paid back in their entirety. This news shows the extent to which the current government is not interested in that. Paying for universities via student loans has never been about saving tax-payers' money, or about making students more responsible for the "privilege" of having a degree. It has always been about turning public debt into private debt in order to fiddle the books. If it can help a few private companies make some more profit, that's a bonus.
On a broader level, George Osborne's entire economic policy is one of turning public debt into private debt. Rather than the taxpayer being liable for the national debt, individuals should be made responsible by being driven into debt. This makes sense as a policy from a Tory perspective because private debt - unlike tax - costs the rich less and the poor more. Parents of children at Eton cannot wait for them to get to university, when fees will "only" be £9000 a year, while children from middle-income backgrounds, destined for middle-income graduate jobs, will end up paying far more.
It is time that a major political party came clean about student loans, though. University education is still being paid for out of general taxation. Students are being put in debt with all that means, and will one day be chased by private loans companies who have bought the loans for a fraction of their cost. Labour should take the risk of promising the abolition of tuition fees. It makes no real difference to the deficit or to the tax payer but every difference to a large number of students and their families. It would win votes too!