In June 2012 universities minister David Willetts told MPs: ‘In the letter that every student gets there are some words to the effect that governments reserve the right to change the terms of the loans. That is a text that has always been there for students, but we have no plans to change the framework we have explained to the House of Commons.’
On 27 2013 June Treasury Chief Secretary Danny Alexander announced the government’s intention to sell off the pre-2012 student loan book by 2015. Guided by the investment bank Rothschild, who devised the policy, student debts worth about £40bn will be paid to private banks, fund managers and similar parasites, instead of to the government. Student loans were introduced by the Labour government in 1998 and 3.6 million people took them out before 2012. Rothschild is vexed by the limit on the interest charged on the loans, which is capped at the RPI measure of inflation or Bank base rate plus 1%, whichever is the lowest; a disincentive to potential investors, says Rothschild. Consequently, it is proposed that the cap on interest charges be abolished or a new rate be introduced, for example 3.6%, in line with the RPI in March 2012 – or, frankly, whatever they can get away with. As a result it is calculated that a worker earning £25,000 a year and owing £25,000 of student loan debt will not have paid off the loan even upon retirement.
Displaying the financial ingenuity that bankers and the government demonstrated by introducing the Private Finance Initiative to raise money for the NHS – only to then to be able loot it, a similar plan is afoot for the student loans. In exchange for buying the loans, banks and fund managers will be guaranteed by the government that public money will be used to cover any risk of non-payments. This way the government gets cash and if the interest rate cap is removed the borrowers are fleeced all the more and if they should default the tax payer meets the bill and either way the banks are laughing – and very profitable.
Victoria Smith
