Sale of Student Loans: Regulation

Rupa Huq Excerpts

Tuesday 7th March 2017 Westminster Hall

[Mr Cunningham]

I totally agree with my hon. Friend. It is about time we stopped social engineering with education. We are getting to a point where we want some sort of commission established. I hope the Minister will announce that when he responds to the debate.

Will the personal details of students be secure? How will repayment work for European Union students? How will Welsh students be affected? The National Union of Students has consistently expressed concerns that such a sale is not in the interests of students, graduates or taxpayers. What implications will the sale have for students?

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I have the University of West London in my constituency. I do not have as many universities as my hon. Friend, but has he received emails, as I have, from students who are concerned that the indecent haste to sell off the family silver will mean that students who thought they were taking out debt that could go back to the state to fund public services will now be lining the pockets of private companies? It makes no financial sense, as the Financial Times has pointed out.

[Mr Cunningham]

My hon. Friend has put her finger on it. The Government are clearly taking an ideological approach, rather than a logical approach.

Can the Minister tell us whether there will be protection from adverse terms and conditions? In the future, we may find ourselves in a situation where the terms and conditions of student loans are designed with future buyers in mind, rather than the interests of students. The sale will not protect post-2012 students from further retrospective changes to repayment terms. That is a source of anxiety for many students and may have an impact on people’s decision to go to university. Students are questioning who is really benefiting from their education.

Selling student loans represents a dangerous precedent. It paves the way for future privatisation of the education sector—I hope my colleagues will note that. The NUS is strongly opposed to the idea that profit is made from student debt. Privatising public assets should not be done for short-term profit.

Finally, the Government never learn any lessons. The sale will do nothing to ease the burden of debt piled on students who have faced trebled tuition fees and the scrapping of maintenance grants and bursaries. The Government have already changed the terms of post-2012 loans. How will the sale instil any confidence that more changes will not be made that are detrimental to students?

--- Later in debate ---

[Joseph Johnson]

I have just given exactly those assurances. After the sale of this part of the student loan book, terms and conditions will not change as a result of any actions by the investors who go on to own them.

The sale process we have launched covers loans issued under the previous system, which operated before 2012. Specifically, the loans in scope are those issued by English local authorities only, and which entered repayment between 2002 and 2006. A loan enters repayment the April after the student leaves his or her course, so most of the loans in the scope of the sale were taken out between 1998 and 2002. Some loans taken out after that date might also be in scope if they entered repayment in 2006. Loans issued by the devolved Administrations are not in scope, and nor are loans to EU borrowers, who became eligible to apply for a student loan from an English local authority only in 2006.

[Dr Huq]

Has the Minister has seen the Financial Times article from 8 February, which says that the Government are in a unique position to be the lender because they are able to monitor graduates’ earnings? How will private companies do that? The article’s headline is, “Selling off student loans makes no sense”. Does the Minister have any comments on that? That was not the Socialist Worker, but the Financial Times.

[Joseph Johnson]

I cannot be held accountable for the views of the FT. The Government have made it clear that we will proceed with a sale only if it represents value for money. There will be a rigorous assessment, and, as per the Sale of Student Loans Act 2008 passed by the last Labour Government, the Government will be obliged to produce a report to Parliament within three months of the sale explaining the whole process. Parliament will have an opportunity to assess that point in great detail.

The sale will comprise the future repayments on the outstanding balances on a selection of these loans, which have a total face value of about £4 billion. The retention value to the Government is lower and is calculated using the standard Treasury Green Book methodology that was developed for asset sales. It also accounts for Government subsidy of the student loan system. The loans that are being sold have already been in repayment for 10 years or more, and therefore much of their original value has already been paid back to the Government.

A securitisation structure will be used for the sale to enable the Government to maximise value for money for the taxpayer. Under that structure, the loans will be sold to a new independent English-domiciled company known as the issuer, whose sole purpose is to own the loans on behalf of investors. Investors will purchase notes issued by the issuer, and the issuer will make payments on the notes using the repayments made on the underlying loans. The sale is a competitive process open to all eligible investors. Market testing reassures us that the different tranches of notes are expected to be attractive to a range of potential investors, thereby promoting an efficient market and optimal pricing.

I emphasise that the sale will not affect the position of graduates or students. Her Majesty’s Revenue and Customs and the Student Loans Company will continue to service loans in the scope of the sale on the same basis as equivalent unsold loans. As I said earlier, investors have no right to change any of the current loan arrangements or directly to contact people with student loans, including those in the scope of a sale.