Student Loan Debt: The Tories seeking to sweeten deal for privateers
The Tories plan to increase Student Loan debt interest rates to 6% in September, it is the first phase in an experiment to test public reaction. If the Tories get away with the increase in September they will begin the process of untethering interest rates for Student Loan debt, effectively making a free market for the interest charges on student debt, and once they have established that precedent they plan to sell on the student debt to payday loan companies at a loss to the British taxpayer but built in profits for the purchasers. Essentially, the Tories will tie students to debts that they will be paying for for most of their working lives and will never be able to pay off.
What is the motivation for the Tories to make this move with Student Loan debt?
Having already uncoupled the size of tuition fee charges, the Tories (and their Lib Dem coalition partners from 2010 to 2015) have created a multi £billion pot of debt. The problem has been that the debt is unattractive to potential privateers because safeguards limited the interest on the loans. The size of the debt, alone, is not enough to attract vultures, there must be means to turn sizable profits from it. Hence the untethering of interest rates. The eventual goal will be to move student debt into the same bracket as all other household borrowing, with all the high risks for borrowers that that will involve.
I would expect that we will see an extremely hasty push by the Tories to tie British student debt to the private market before 2020, as they fear they may not be in a position to do so after the 2020 general election. A future Corbyn led Labour government could potentially address the failed experiment with tuition fees and wipe the system clean, denying profiteers their pound of flesh.
Student loans cost taxpayers more money than awarding grants because of costs administering the debts and they will soon become just another entirely privatised sector, inefficiently delivering a service to the public in the same failed way that we suffer the privatised transport network and the increasingly privatised NHS. Student loan debt will just be the latest method of transferring wealth from taxpayers to privateers.