29 July 2014 
Matt Sisson, Projects and Membership Manager
Last week the government announced that the planned sale of the student loan book had fallen through, following a veto by Vince Cable, Secretary of State for Business, Innovation, and Skills. In an article in the FT this week, former Universities Minister David Willetts has proposed an alternative. Whilst stressing that it is “not government policy”, he suggests that universities should be able to buy a part of their own students’ debts. The policy appears, at least in part, to reduce the pressure on the government finances from the increasing student loan burden, as well as giving universities “a direct financial interest in ensuring their graduates secure well-paid jobs that enable them to pay back more of their debt sooner”. Mr Willetts also discussed the proposals on Newsnight (starting at 20.00 in the link).
However a number of commentators have concerns. In a separate FT article, Sir Steve Smith, vice-chancellor of Exeter university, was quoted as saying that “On the plus side it could be part of placing university funding on a more sustainable footing… but the main problem is that university governing bodies would need to be able to fund this in a way that increased their resources, not risked draining them.” This concern is acknowledged by Willetts, who writes that just 10,000 students at a university could accumulate student loans of £100million a year, “which would soon dwarf all the university’s other assets”.
According to the FT, a University Alliance spokesman questioned the proposal's potential impact on efforts to widen participation. They said; “allowing a small number of the wealthiest universities to benefit from buying their loan book rewards the fact that they take the highest achieving students, from the wealthiest backgrounds that go on to be the highest earners”. There are summary articles on the story in the Times Higher and the Guardian.
