I'm in shock that I basically agree with SMD on everything he said about Student Loans. I guess this is the crossover point for socialists and social liberals who see publicly funded education as respectively, a good thing for society, and a necessary baseline for 'real' liberty (like a health service). I've always seen education like an investment myself. It'll pay off in both social terms and financial terms. The "lawyer on 100K" will pay enough high-rate tax to easily repay the cost of his tuition, they're not being subsidised "by the cleaner" in the way that, say, a farmer is.
I'd add that they are also a stealthy way to create a generation who see private debt as 'not a problem if it's manageable', thus ensuring that capitalist financiers keep their rent-seeking incomes. You know that people are going to look at a £1,000 credit card debt as peanuts when they owe £70,000 to the student loan company anyway. But hey, let's try another less socialist argument for why they are utter bullshit.
This is going to get a bit long and ranty. I'll put an incendiary hot take soundbite at the end for those who don't want to read it all.
Student loans have nothing to do with what is right for students, universities or the nation/society as a whole.
Their entire purpose was to change the accounting so that university funding counted as a loan rather than "government spending". This let them ignore it when calculating budget deficits and the like.
Then having done this, the loans could be sold as an asset ("What? it's nothing like a Collateralised Debt Obligation, nothing could possibly go wrong!"), removing it from government books completely. There was no direct link in government accounts between the borrowing cost and the eventual sale cost, so the govenrment thought they could get away with hiding the cost difference between the initial borrowing and the sale price.
This is also why student loans are currently at "inflation"+3% (5.4% currently), which I've always thought was ridiculous since the loan will increase faster than most people pay it off. My old loan was link to inflation only, so it wasn't so bad. So why, when the government can borrow at <1% rate, do student loans have a 5.4% interest rate?
Well, what kind of investment bank is interested in buying a consolidated debt where even the book value with an optimistic 100% repayment forecast gives them 0% profit in real terms. Much better if a hedge fund can convert that into a CDO where 'priority tier' investors get a profit of 3% in real terms regardless of inflation.
The government have already sold some student debt at way below it's face value (about half for the last set of sales) to make some quick cash (something something "because austerity").
So middle-income people get a 9% increase in their marginal tax rate unless they're super wealthy and just pay it off.
I find it shocking that the boomers that complain about the a 10% extra marginal tax rate on earnings >00K, but don't care that most millennials will be paying 10% extra on >25K.
The government have been heavily criticised for this by that famously pink paper (must be a bunch of commies!), the Finacial Times:
UK student debt sales make little economic sense
Financial return on privatisation of student loans criticised
Student loan sale cost UK £604m in lost revenues, auditor finds
So, it fucks up universities and academia by turning them into market-led organisations. It turns students into willing carriers of debt, who pay a special 10% middle income tax that previous generations escaped. And the government still pay at least half the costs anyway (and probably much more, since the debts that were sold are likely to be the best quality loans).
Saying that student loans
for tuition fees allow more low-income students to go to university than in 2010 is like saying that austerity was good for the poor because low-income people are earning more on average now compared to 2010. It happened despite those things, not because of them. Tuition fees are just bullshit.
If you want to make a case for student loans helping low income people, then it needs to be made for the maintenance loan, not the tuition fee loan. And that maintenance loan should not be at 5.4% interest. I would completely support providing large inflation-linked loans to poorer students for living expenses (with lower-level loans for everyone). That seems to me the right compromise between helping poor people afford uni and reclaiming some of the costs.
Maybe when Boris privatises the NHS, people here will say that it's only right that we take loans to pay for chemo (if it doesn't work, you'll die before you repay it so who cares!), and that it's not right that a cleaner subsidises the treatment of a lawyer who could afford to go private.
