Student Loans to be Privatised, Interest Rates Could Rise


In a situation which may have many students wondering if they are making deals with Darth Vader, it was confirmed two months ago that the Government is planning on privatising the student loan book, as part of a plan to raise £10bn for a government infrastructure project

Earlier in the same month, a ‘secret report’ detailed recommendations to the government that the interest rate cap that currently exists on those loans be scrubbed, allowing the private owner (whomsoever that turns out to be) to increase the value of the loans, and as a consequence, the amount that we students pay.

Vince Cable has already ruled out the suggestion, although he did not rule out an alternative suggestion which means that the government effectively pays the difference between what the private holders of the loans make from the purchase, and what they would have expected to make (effectively, spreading the increased cost of the loans across all taxpayers, rather than just borrowers).

The figure of £10bn will come as a surprise to some people, as the debt was valued at over £14bn in 2004- and can only have risen as both student fees and student numbers have gone up in the intervening time. The advantage to the government of the current plan is that it gives the government an instantaneous lump sum, rather than having to wait for the loans to be repaid. The irony of this thought process will not be lost on the plan’s critics, who will note that the report which details these plans opens with a preface denouncing “a collective national mindset that has privileged the short term over the long term, and has postponed difficult decisions.”

A petition was started to urge the government to re-think its position on the matter, and has since gained the requisite number of signatures to force a response from the government department responsible- although this will not likely be seen until after the petition’s closing date some time in 2014.

Whilst the plans for what will happen to student loans sold to the private companies has yet to be detailed in full- including the asking price and conditions of sale, it is self-evident that the government are carefully considering all of the available options to entice purchasers, rather than retain the student loan book on their own ledgers. Meanwhile, students past and present will now be paying rapt attention, to see exactly how Faustian this deal has become, and to whether they will in fact have any mechanism to influence those to whom they are being rendered indebted- an end which is currently mechanised by the popular vote.


Philip Adler is a Ph. D. Student of Crystallography, studying in Chemistry.

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