MSE News: Government: Student loan sale won't push up rates

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"The Government has confirmed student loan rates will not rise for borrowers as a result the planned sale of the loan book ...."

Read the full story:

Government: Student loan sale won't push up rates

wizk1

So the Government is about to do the same thing it has done with its gold reserves and pretty much every other asset it has... sell it for a fraction of what it's worth for a short-term bump in revenue. That's the only way the SLC will be profitable to its buyer. What next?

Sol00

They're not selling the SLC, just its loan book, which they have done for years anyway.

I know they need as much money as they can get, but I don't understand why they'd write off money owed to them, which is what would happen if they sold accounts off to the private sector.

BigJonnyB

I don't see the point in selling it off to private firms. The tory idea to give a 10% discount if graduates made early overpayments was a better idea - it had the potential to bring down the debt, while offering graduates an incentive to pay off early. I'd have certainly paid mine off.

Instead, it'll no doubt be sold to the private firms which will scupper the tory plans :rolleyes:

MORPH3US

How will a private firm make any money having loads of people owing it money at interest rates of 0% or less?!?!?

BigJonnyB

I think that's probably the point...the government will sell off the loan book for less than it is worth. So for every million thats transferred, the government get say £900,000. This shores up their finances as they have released 90% of the money. The provate firm should then get back 100% of the loan book? Of course, none of us know how cheap the government are prepared to sell it off for.

If this is how the system will work, then students should be furious. The government could have just allowed us to be our own debt back at a discount (i.e. the tories scheme) rather than allowing private companies to profit :mad:

Sol00

BigJonnyB wrote: »

I think that's probably the point...the government will sell off the loan book for less than it is worth. So for every million thats transferred, the government get say £900,000. This shores up their finances as they have released 90% of the money. The provate firm should then get back 100% of the loan book? Of course, none of us know how cheap the government are prepared to sell it off for.

If this is how the system will work, then students should be furious. The government could have just allowed us to be our own debt back at a discount (i.e. the tories scheme) rather than allowing private companies to profit :mad:

I agree with that. I don't understand why giving away taxpayers' money to the private sector at discount prices is a benefit to us, although, this isn't the first time they've sold student debt.

bumpoowee

BigJonnyB wrote: »

I think that's probably the point...the government will sell off the loan book for less than it is worth. So for every million thats transferred, the government get say £900,000. This shores up their finances as they have released 90% of the money. The provate firm should then get back 100% of the loan book? Of course, none of us know how cheap the government are prepared to sell it off for.

If this is how the system will work, then students should be furious. The government could have just allowed us to be our own debt back at a discount (i.e. the tories scheme) rather than allowing private companies to profit :mad:

Yeah, I expect it will be sold for much less than the face value of the loans, given that students are borrowing more and more money and earning less and less hence an ever decreasing proportion of them are paying the money back.

surfsister

can't see how it all works if loans are at 0% where's the profit come in?

bumpoowee

surfsister wrote: »

can't see how it all works if loans are at 0% where's the profit come in?

Because the government will sell a loan worth say £20k for say £5k to the private company. The private company can then collect the full £20k and make £15k profit (of course many of these loans will never be repaid in full so they are unlikely to collect the full balance of the loan book).

I don't see why the government hasn't gone directly to the students with the same offer, eg if you owe £20k pay £10k now and your loan will be cleared. I guess labour are just keen to !!!! off the young generation even more than they already have.

With regards to the assurance that private companies won't be able to push the rates up, I wouldn't put much more weight on that promise than the broken promise to keep the rates pegged to inflation.

Oldernotwiser

bumpoowee wrote: »

Because the government will sell a loan worth say £20k for say £5k to the private company. The private company can then collect the full £20k and make £15k profit (of course many of these loans will never be repaid in full so they are unlikely to collect the full balance of the loan book).

I don't see why the government hasn't gone directly to the students with the same offer, eg if you owe £20k pay £10k now and your loan will be cleared. I guess labour are just keen to !!!! off the young generation even more than they already have.

With regards to the assurance that private companies won't be able to push the rates up, I wouldn't put much more weight on that promise than the broken promise to keep the rates pegged to inflation.

Great chunks of student loans were sold off years ago (mine's now with Honours Student Loans) and rates haven't risen.