British government planning privatization of student loan debt

Proposal part of broader privatization effort, would likely lead to increased interest rates.

from the World Socialist Web Site

"A secret internal government report has revealed the plans of the Conservative-Liberal Democrat coalition to sell student loan debt to private investors. An estimated £40 billion of debt is being targeted, composed of loans to students between 1998 and 2012, according to the document seen by the Guardian .

"The report, produced by Rothschild Investment Bank, is an expression of the ruthless manner in which ruling circles are proceeding to extract maximum profits from every area of social and economic life. The proposal is part of a broader programme of privatizations and spending cuts announced in the government’s recent spending review, which included a further £11.5 billion reduction in the welfare budget to cut the UK’s massive budget deficit.

"An increase in interest rates on student loans would be a precondition to make the investments more attractive to private financiers, the document argued. Alternatively a so-called 'synthetic hedge' could be considered, which would involve government subsidies to ensure the profits of potential investors. Currently the interest on student loans stands at the base lending rate set by the Bank of England at 0.5 percent, plus one percent, giving an overall interest rate of 1.5 percent. Such rates of return for investors are deemed unacceptably low. …"

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