Surprise and concern were expressed in equal measure in early February when the government announced the sale of the Student Loans Company. The Treasury sought to reassure existing and past students with outstanding loans that nothing will change as far as administration of their debt is concerned.
Vince Cable, Lib-Dem MP and one-time Business Secretary under the coalition government previously scrapped a similar scheme as poor value for the taxpayers. This second planned sell off is likely to go ahead once all reassurances have been fulfilled.
What are the Major Concerns?
Critics pointed to two major issues over the claims that there will be no change for students past and present. Firstly, the opposition and other opponents claimed that the government had previously moved the goalposts over repayment terms. Equally concerning was the value of the sale of the debt – some claimed that the £12bn raised for the treasury would not be adequate value for money for taxpayers.
The founder of MoneSsavingExpert.com Martin Lewis explained that the previous sale to a private investor created serious problems for people with outstanding student loans. The private firm that bought the debt (Erudio) sent demanding letters to customers with outstanding debts even though they had not reached the minimum threshold for repayment. However, this is unlikely to be the case here, as only the debt will be sold off – Student Loan Company will continue to administer the collection.
Comments Against and In Favour of the Sell-Off
The Vice President of the NUS has already spoken out about the deal, explaining that this was a worrying trend for government to sell off student debt to private firms. The VP expressed concerns that this was just the first step in the wholesale privatisation of the British education system with upward funnelling towards banking once more.
In contrast, the director of Higher Education Policy Institute said that it made good financial sense. However, he was not completely enthusiastic. He pointed to Gordon Brown’s sale of the gold reserves at rock bottom prices and the sale of Royal Mail as recent poor value for money deals. He did recognise the need to reduce public finances, especially the pension fund.
How Will This Affect Previous Students?
While students who have graduated since 2012 are unlikely to experience any great difference in the administration, Nicholas Barr – Professor of Public Economics at LSE explained that those with debts from before this period may see some structural changes to their debt.
The company that bought the debt may wish to look at long-term debt where there is no clear timeframe for repayment and that could mean retrospective changes to terms and conditions. The debt is likely to have been priced conservatively – it may be some time before which side (the seller or the buyer) got the better bargain.