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Student Loans Debt to be Sold

Nov 07 2007 12:30

Andrew Holland

The government is to raise billions of pounds by selling off the student loans debt to a private company.

The government stands to pocket lots of cash

Today's Queen's speech saw the government confirm the sale of debt owned by the Student Loans Company to private companies. The “sale of students loans bill” gives permission for the new minister of students, Lord Triesman, to sell part of the SLC's student loan portfolio, including personal information. Around £6bn is expected to be made over the next three years from the sale over next three years, with the total value of the student loan book is sitting at £18billion. If government targets are to be met the value of student loans deb will rise to over £55bn over ten years.

The NUS has expressed concerns that this will lead to students being charged higher rates of interest on their loans. Currently the interest is linked to inflation, so theoretically you only pay back what you borrow. A rise in interest rates on student loans could have disastrous consequences for graduates. Questions were also raised about why the government has chosen to take this course of action. The NUS president, Gemma Tumelty, believes that this shows that the student loan system is unsustainable in the long term. "Recent events in the US show the risks associated with selling off debt and the consequences it can produce in the wider economy," Ms Tumelty said.

The government insists that this will not affect students, and that it would retain control over all interest rates and repayment thresholds. All loans would still be administered through the Student Loans Company, and purchasers will only have information for managing the loans.

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Discussion about “Student Loans Debt to be Sold”

The comments below are unmoderated submissions by Live! readers. The Editor accepts no liability for their content, nor for any offence caused by them. Any complaints should be directed to the Editor.

1. Finlay

Nov 07 2007 13:40

Uh, didn't they do this before? http://www.honoursstudentloans.co.uk/topic/abouthonoursstudentloans.aspx

2. WT?

Nov 07 2007 21:41

It won't make much difference seeing as the rate doubled in August and is currently standing at 4.9% or similar (can't remember the exact rate though). Did the NUS have any opinion on this or are they only going to pretend to do something when they think it would look bad if they didn't (to your average student who doesn't generally give a f*ck)?

More worrying, perhaps, is the personal information... does this mean that whereas previously information about the amount owed by students was not shared with credit agencies, and therfore not affecting your credit rating... now will be shared? Are students going to be bombarded with junk mail offering a more competitive rate than their student loan, with discounted rates for the first year, more cashback deals and all the cons attached?

When the NUS are saying this... "Our primary concern is that individual borrowers - students and graduates - who have received loans, will not be affected by these proposals through changes in terms and conditions or increased interest rates"...

students don't stand a chance.

3. Andrew Holland

Nov 07 2007 22:51

I think the government is just leaving the actual money lending to the third partys. Although I do wonder why they have decided to do this. No third party lending company would go into this scheme without having financial reasons behind it, which cannot bode well for future students.

4. He Who Knows All

Nov 08 2007 00:09

No company would enter into this unless they had a clear, achievable plan for getting more out than they put in. If the Government is not going to find this "extra" for the purchasing company, there is only one place it could come from - the students. And would the personal info include details of your salary (since you pay back a minimum of 9% of what you earn over £15k)?

5. Andy Simpson

Nov 08 2007 03:06

Presumably data protection laws would stop them doing anything dodgy with personal information. They're only allowed to use it for the purpose with which it was collected, i.e. administering student loans, so any other usage would be illegal.

Ms Tumelty seems to misunderstand the situation. Selling off debt is only a bad idea when you're selling debt that is unlikely to ever get paid back. Student debt is not really in that category.

You do have to wonder though quite how a private company will make money from debt where the rate is pegged to inflation. Unless the government plans to raise the rates, the plan is nonsensical.

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