Privatising the student loan book and raising the interest cap - illegal?

Sarah920

http://www.newstatesman.com/economics/2013/06/danny-alexander-confirms-student-loan-book-will-be-privatised

So, the Tories and the Lib Dems are now seriously planning to privatise our loans and make it worth buying by private investment by lifting the interest cap to make it market rate instead of inflation.

What I want to know is, how the hell is this not actually illegal under trading standards? I took out my loan and am £20k in debt precisely because the government, the NUS, *MSE*:money:, everyone assured me that I would never be charged more than the rate of inflation and my loan would be cancelled altogether by the time I am 50. I would never have taken out a market rate loan for my education, I'm sure many wouldn't have done.

So, if this policy happens, can we not challenge it the way we challenged PPI?

saker75

Selling off the student loans book isn't new - it originated under Labour.
The conditions of the loans will not change, just the beneficiary.

dtsazza

As saker says, who "owns" the loan is actually irrelevant to the borrower. If it helps, imagine that the private company aren't actually taking ownership of the loan - they're paying a lump sum in exchange for the government paying all future repayments through to them. That would be functionally identical from the borrower's perspective; they still need to pay the loan back under the initial terms.

Now of course, if the interest rates change, that's a completely different issue. (And it's distinct to the ownership issue too; whether rates rise under government ownership or private ownership, the issue is the same). If the rate rise is in breach of the terms of the loan agreement then indeed this cannot be done, and could be challenged.

However, if the T&Cs of your student loan agreement included a clause that allowed the rate to change in future, then there's no grounds to challenge the rise.

Sarah920

Can I suggest you read the article I posted before commenting?

The specific point is that they're planning to raise the cap on interest rates.

http://www.newstatesman.com/economics/2013/06/spot-difference-pensions-vs-student-loans

happycamel_2

It's irrelevant who owns the loan whether the can change the interest. The new owner has no more rights than the old owner. It is the current owner, the government, who can change the rates. They can do so because that is what is in the terms and conditions of the loan you (and I) signed up to, as has been previously pointed out. For most of us, a labour government was in power when those terms we drawn up.

Whether a Labour government, in power now, would invoke the terms and change the rates is impossible to say. But it is entirely separate to who owns the loan and the fact you agreed the terms when you took the money.

I'm not telling you anything that hasn't already been said in this thread so, to brutally honest, if you can't understand it then you're probably right about not wasting money on your education.

Daedalus

If nearly everyone signed up believing X, but the actual contract states Y, and part of the reason for believing X is from statements made by party A who is also a party to the contract, then it certainly creates ample room for a legal challenge.