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To: Rt Hon Sajid Javid MP, Secretary of State for Business, Innovation and Skills

Don't privatise student loans

Don't privatise student loans

We are angry that the government plans to start selling off the 1998-2012 student loan book from next year. This plan needs to be scrapped.

Recent polling by We Own It reveals that 64% of the public are against the sale. This plan clearly isn’t something the public want.

On top of this, the sale of the student loan book doesn’t make financial sense. The government today is £240 million worse off because of the previous Labour decision to sell off pre 1998 loans. The sell off plan shows a short term focus and narrow minded approach – not a long term plan. Millions of us could end up paying more if the terms of the loans are changed. Or all of all us could lose out by subsidising profits for the private buyers of the debt.

We don’t think it’s fair that the government doesn’t have to consult the public before privatising student loans. It’s also not right that the terms of the loans can be changed without the permission of graduates. Interest rates could increase and hit us, our friends, our relatives, and our sons and daughters, really hard.

Vince Cable did a U-turn on this policy in 2014 for good reasons. The financial threat posed by privatisation could make us all poorer and discourage new students.

Stop the sell off of our student loans.

Why is this important?

64% of us don't want student loans to be privatised - the government needs to listen. This plan doesn't make financial sense and needs to be scrapped.

Martin Wolf from the Financial Times explains ‘Why the UK should not sell its student loan book’:

“The UK Treasury is, it is reported, considering the sale of parts of its student loan book. This provokes a big question: when should the UK government sell such an asset – given that it is both immortal and solvent?

The best answer has two parts. First, it must be believed that the asset would be better managed by the private sector. And, second, it must be believed that this superior private management can only be introduced by selling the assets – rather than introducing some type of private management contract.

Thus, if the government decided to privatise the Royal Bank of Scotland, it should be because the value of the business would be higher under private ownership than it would be under public ownership.

What the government paid for RBS shares is irrelevant: those are sunk costs. Similarly, the case for selling the Royal Mail is that it would be more valuable as a private business than in government hands.

What of the student loan book? Would a buyer be able to offer more to the government for this stream of income than it is worth in public hands? No, because no private party has a lower borrowing cost than the government, since the government is the most creditworthy entity in the country. So the value of the student loan book to the government, given its low discount rate, is higher than to any potential private buyer.

That might not be the case if the Treasury suffered from a genuine – as opposed to a purely artificial – borrowing constraint. In that case, the marginal cost of borrowing might be much higher than the average cost. That could justify selling existing assets, to replace them with more valuable assets. But the government suffers from no such borrowing constraint.

So why do it? It is yet another example of a bigger problem: the manic concentration on the government’s overall debts – the totemic public debt ratio – rather than the whole balance sheet.

Selling the book flatters the net public debt level in the very short term. Yet who would be impressed with a company that reported only its debts, but not its assets? It is not a sensible way to manage one’s activities. The student loan book should be left exactly where it is."

How it will be delivered

In person.


Reasons for signing

  • Currently Erudio is issuing CCJ(s) and sending out debt letters effecting credit scores for past students!
  • Yet another reason for people to feel discouraged from pursuing further education and self betterment to the benefit of all society. Not only should these loans NOT be sold off, but education should be made FREE again.
  • dave and george - neo-liberal extremists

Updates

2015-12-14 13:05:34 +0000

1,000 signatures reached

2015-12-14 11:51:44 +0000

500 signatures reached

2015-12-14 11:21:04 +0000

100 signatures reached

2015-12-14 11:18:53 +0000

50 signatures reached

2015-12-14 11:17:29 +0000

25 signatures reached

2015-12-14 11:16:14 +0000

10 signatures reached