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November 29, 2013 / politicsbitesize

The Future of Student Loans

BrumStudentsIn a report published this week, the National Audit Office (NAO) has warned the Government that the student loan bill could rise to £200bn over the next 30 years.  The NAO raised its concerns after it calculated that some 6.5m students would borrow money to attend university, but that around 50% of these would not be expected to earn enough to ever repay their loan.

The increase in tuition fees in England, implemented back in 2010, has meant that many more students have to borrow in order to attend university.  At the moment the rate of interest for a student loan is a flat 2.2% plus inflation, which rises to 3% depending on earnings.  The NAO’s report suggests that there needs to be much tighter scrutiny of levels of repayment if the Government are to avoid a £200bn loan book.

To date the Government has sold £890m of its current £45bn student loan book to a debt management consortium for £160m.  According to a BBC news report, ‘Erudio Student Loans won the bid to buy the remaining 17% of mortgage-style loans taken out by students between 1990 and 1998’.

There are many critics of the move to privatise national debt.  The president of the National Union of Students, Toni Pearce, said it is ‘extremely concerning’ because it would see ‘the public subsidising a private company making a profit from public debt’.  But the Universities Minister, David Willetts, countered this argument by stating that, ‘the private sector is well placed to maximise returns from the book’.  He went on to reassure borrowers that they, ‘will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans’.  But that remains to be seen.

In the meantime, the student protests that began last week have continued in earnest at the University of Birmingham, where students occupying university facilities have sworn not to end their acts of civil disobedience.  A group calling themselves ‘Defend Education Birmingham’ have been demonstrating against the sell-off of the student loan book for over a week now, despite being ordered by a court injunction to vacate the premises.   According to a report by the Independent, the group announced on Tuesday that around 40 students have ‘decided to stay past the deadline in defiance of the injunction’ and ‘have voted to stay for the foreseeable future’.

In solidarity with the students and in defence of the right to resist, The People’s Assembly will be launching a nationwide campaign starting with a rally in Central London in January.  Watch this space!

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