Students Loans: A Quick Buck
The government plans to sell out part of the student loan book.
Disposing of government assets is a risky business.
Despite his claim to have “saved the world” in 2008 by averting the collapse of the British banking industry, many voters instead remember Gordon Brown as the dupe who flogged Britain’s gold when prices were at a historical low.
Now Jo Johnson, the universities minister, must hope for better luck.
On February 6th he set out a plan to sell a slice of the student debt held by the government.
It is a pioneering move: Britain is the first country to hawk income-contingent student loans to private investors.
The proposed sale has been a decade in the making.
In 2008 the Labour government passed the Sale of Student Loans Act, which laid the legal groundwork.
The deal’s complexity is the main reason for the delay.
It would involve around ￡4bn ($5bn) of loans made to nearly half a million students, who began making repayments between 2002 and 2006.
There is little certainty about the repayment schedule: graduates pay money back only when they cross an earnings threshold, currently ￡17,495.
They pay 9% of their earnings above the level; interest is the lower of inflation or the base rate plus one percentage point.
All this makes it hard to work out what the loans are worth.
The deal would involve slightly less than 10% of the student debt the government holds from before the tuition-fee system was changed in 2012.
If all goes well it is expected to sell further tranches of the debt.
Selling it gradually is sensible, says Nicholas Barr of the London School of Economics, since nobody has much idea how it will work out.
Opposition to the sale has been building for some time.
In 2014 the National Union of Students warned the government against flogging the debt to “some unscrupulous, bowler hatted, fat-cat profiteers.”
More recently, critics have worried that graduates may lose out if the purchaser of the debt decided to tinker with the terms of their loans.
The government has promised that there will be no such changes.
That means graduates may in fact benefit from the sale.
If the terms of the loans are fixed, the government would no longer be able to fiddle with them, as George Osborne, then chancellor, did with a different generation of student loans in 2015.
But, notes Nick Hillman of the Higher Education Policy Institute, it would also be harder for a future government to relax the conditions, perhaps as part of a pre-election giveaway.
A bigger worry is that the taxpayer will get a bad deal.
When a previous government sold a more straightforward form of student debt from the 1990s, the hope was that the buyer would be more tenacious when chasing delinquent graduates.
Since repayment is now deducted straight from pay-packets, there is no obvious way for investors to whip the regime into better shape.
And buyers are likely to be leery of income-contingent loans because of the difficulty in assessing their value and because they are an unfamiliar form of debt, says Mr Barr.
The government is simply swapping a future flow of income for cash today, and will probably pay to do so.
1.sell out 售出；卖完
例句:Football games often sell out well in advance.
2.fiddle with 摆弄；玩弄
例句:I am in a dilemma, just fiddle with the faggots in the kitchen with the poker.
3.lose out 输掉
例句:Women have lost out in this new pay flexibility.
4.no longer 不再
例句:After about three months, I was no longer addicted to nicotine.