UK Govt Has Sold Your Student Loans to Debt Collectors: Corruption, Plain and Simple


As of today, £900m of student loans taken out before 1998 are owed not to the state, but to private debt collection agencies.  The government sold the debt for £160m, in what it calls an effort to ‘balance the books’.  Baloney.  This is corruption, plain and simple. The government has also lined up the £40bn of student loans taken out since 1998 and has prepared plans to sell this too, and retrospectively raise interest rates.

Making Students Pay


It’s hard to believe that a little over a decade ago, we viewed higher education as a social service.  We clubbed together to put our young people through university, as an investment in their (and our) future. However, as manufacturing and many non-graduate jobs moved offshore to allow corporations to maximise profits from poor labour conditions abroad, a pending jobs crisis was foreseen.

This was the ‘changing economy and jobs landscape’ Tony Blair was talking about in 1999 which called for his target of 50% of young people attending University.  His aim was to put more young people through University and create new graduate jobs for these young people to migrate to.  The populace were told that in order to fund this expansion in student numbers, tuition fees were required to spread the burden.

The story was, that in order for more young people to go to University, fees are required.  A quick look at the facts proves this argument invalid on several grounds.

Firstly, the UK is not a leader of developed nations in terms of the percentage of its population receiving a University education.  In fact, between 2000 and 2008 (after tuition fees were introduced), the UK fell from third to fifteenth in graduate numbers, according to OECD figures.

Secondly, several nations above the UK in this league table have not introduced tuition fees.  In Finland, which tops the league, 80% of young women attend University and there are no tuition fees. Denmark, Sweden and Norway all outrank the UK and none have introduced tuition fees.

So, introducing tuition fees did not increase the UK student population any faster than the rest of the OECD – in fact, it has risen more slowly than elsewhere.  Neither does a rising student population require the cost of education to be transferred to the student by way of tuition fees.

Nevertheless, the Labour government introduced tuition fees, capped at £3,000 a year.

One of the first acts of the Coalition government was so introduce a new ceiling of £9,000 a year (despite Liberal Democrat pledge to scrap tuition fees altogether) – trebling the potential fees payable by students.

Making Students Pay More


Before 1998, student loans were payable over 60 monthly instalments, paid at the rate of inflation and the debt was cancelled when the graduate reached 50 years old.  Between 1998 and 2012, student loans were based on income as a graduate.  A graduate would pay 9% of their annual income each year once earning more than £15, 795 a year.  At the moment, interest rates are capped on these loans – Graduates pay interest at either the RPI measure of inflation or banks’ base rate plus 1%, whichever is lower.  Since 2012 it has risen to RPI plus 3%.

The government, after inducing young people into debt to fund a former public service, is now seeking to make a profit from the debt.  Today, the government has sold the pre 1998 student loan book for just £160m of the £900m owed, to a debt management consortium.

A previously unseen report, commissioned from the Rothschild Bank on behalf of the government, reveals plans to sell off student loans taken out since 1998 and retrospectively raise the interest rates paid by graduates to increase the attractiveness of the loan book to private buyers.  This could leave 3.6m graduates facing sharp rises in their student loans repayments, while the tax payer stands as guarantor in the event students default on the debt, paying up to ensure the private investors never lose a penny.

The privatisation report states that this low interest rate will be unattractive to private investors and so should be scrapped in favour of higher rates, never mind the impact on the graduates, who took out these loans under the current interest agreement.  According to the Guardian report:

“Removing the cap would, however, burden graduates with years of extra repayments, lasting in some cases until the end of their working lives. At the moment, the cap on student debt taken out before 2012 keeps repayment rates at 1.5%. Lifting it would mean a rate of 3.6%, in line with RPI in March 2012. One indicative calculation suggests that an employee on £25,000 a year, with £25,000 of undergraduate loans taken out before 2012, could work until retirement without ever paying off their debt if the interest rate cap were removed.”

The Rothschild report goes further though.  It also suggests creating a ‘synthetic hedge’ whereby the government pledges to underwrite all risk associated with the student debt – meaning that in the case of default, the tax payer covers the investor’s potential losses.

The Coalition and Higher EducationAB 0031While the Coalition has talked big on higher education, it has delivered lower student numbers, lower budgets and we are already seeing the negative impacts a result.

Back in 1999, on the introduction of fees, the funding agreement for Higher education was £4.2bn.  If spending had been maintained in line with inflation (which would translate into a cut in funding per student given the increased numbers), this figure would stand at £6.1bn today.  However, funding for higher education 2012/13 was cut by £1.2bn, down to just £5.2bn.  More students, less funding.

The 2012 student loan agreement saw the minimum earnings threshold required to begin paying back the now bigger student loan raised to £21,000 a year.  However, Treasury officials are already (less than a year later) demanding this lowered to just £18,000 a year in order to fill the gap left by spending cuts on higher education.

In the longer term, it is estimated that 39.4% of student loans will never be paid back, as graduates will not earn enough to afford the repayments before reaching the end of the repayment term.  Selling the debt to private investors now, and making a future government responsible for the fall out, would allow the Coalition government to maintain their failing policies without the consequences becoming clear on their watch.

In the meantime, the cracks are starting to show:

Preview of Coming Attractions


Student loans gifted to the private sector have proven fairly catastrophic in the US.  Student debt hit $1trn last year, and is now the highest kind of consumer debt, second only to home mortgages.

The number of seriously delinquent loans – those left unpaid for more than 90 days – has risen to an all-time high of 11%.  Worse, a whopping 21% of loans have missed a payment or are not to be paid back at all.  This has raised fears that student loan debt will be the source of the next financial crisis – in effect becoming the new subprime lending crisis.  Whereas is 2007/8 we bailed out Banks who’d dished out unaffordable mortgages, by 2018 we could be bailing out banks who’d dished out unaffordable student loans.

Unaffordable student debt only becomes less affordable when privatised, as interest rates rise.  If the state is the ultimate guarantor of these loans then when the crisis occurs, the tax payer will pick up a bigger financial burden than if the loans had remained with the state throughout.

What privatisation allows though, is a short term mega profit for private investors and a short term fiscal bounce for the sitting government – neither of which will lose out when the chickens come home to roost. This isn’t policy. It’s corruption, plain and simple.

Don’t get angry, get involved!

The Rules – An excellent movement seeking to change the broken rules of the world

Strike Debt – inspiration Occupy Wall St campaign to get rid of unaffordable debt such as student loans


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36 thoughts on “UK Govt Has Sold Your Student Loans to Debt Collectors: Corruption, Plain and Simple

  1. Pingback: Best frontline blogs this week

    • Not if you haven’t been have got into arrears. It stands until arrears are cleared. Also a little known fact is that if you were claiming Housing Benefit at the time of being a student, the loan was deducted as ‘income’ whether you took the loan or not so effectively anyone on benefits paid the loan back twice over!

  2. When tuition fees and student loans were introduced, and the number of students doing degrees tripled, it was pretty obvious that it was going to come to this when the debt got to breaking point. Hello – we are have a national debt of approx £1.4 tn that is increasing by the day, with interest, so where is the slack to keep £40bn of unpaid student loans on the books? Going into £30k- £50k of debt to receive a degree that may not be worth much at all, only to get a job which you could have got at 16 or 18 is just bonkers – and yet this is the reality for 50% of new graduates these days (the graduate job market just does not exist for half of them). The issue is not about not educating our kids, it’s about not wasting their time and then disappointing them. There are other more useful ways to educate young people and prepare them for work in the real world, without a degree – which really is not the be all and end all. Why encourage young people to go through this? Ton’y Blair’s assessment of the needs for the future job market was wrong.

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  4. Nick Clegg – thanks very much for all your help. Bye bye. Your political career will be ending soon. Mostly, I would say, but not wholly, as a result of your stupid decision to support the threshold increase. Students will not forget. No votes. Nil points. No seat. No career ( apart from whatever you can scrounge off your public school mates). Bye.

    • Don’t worry, I’m sure he has a cushy job lined up in the private sector. You know, consultant for one of the collection agencies.

  5. The original contract is the only contract to which you are obliged. If the contract is sold on, the risk is with the buyer of the debt. You have no contract with them, they are merely third party interlopers. Search the Lawful Rebellion site for clearer information

    • It’s always a joy to me when my debt is sold on because I have no contract with the new debt owner and thus can quite happily keep returning their letters back to them with “return to sender – no contract” or I use the blanket Dear Interloper letters asking them to prove the debt and provide copies of contract which of course they never can. Now if these companies had allowed me to draw on the insurance I paid into in good faith there would be no break in payment and thus I feel zero guilt.

  6. This “debt” was created out of nothing; it is backed by nothing and under written by nothing. The fact that they have sold it for 20% of its nominal value, still represents a 20% “profit” created from nothing.
    The use of fiat currencies, fractional reserve banking and the whimsical creation of debt within this system is nothing more than a Ponzi scheme. It is corrupt and immoral and needs to be stopped. There is no reason that governments can’t print federal or state owned currency rather than “renting” it from the network of privately run central banks at interest which simply perpetuates the yoke of unsustainable debt. Until this changes, we will never evolve into the debt free society that we would all benefit from.

  7. I have no contract with any debt collection agency. How then, can they collect a debt for which they can produce no signed contract with them? I have used this argument.

    • They don’t have to have a contract with you, only the owner of your debt. So long as the contract exists for your original debt, and that debt is not forgiven by a creditor in ownership of that debt, you are obliged to pay.

      • Not sure about this. I have successfully argued that for a contract to be valid, equal consideration must be offered up by both parties. Since the money loaned only came into existence after the loan agreement was signed, it cannot be considered lawful consideration and so the contract is void. The only thing of real value in the whole process was my signiture on the promise to pay – anyone intent on paying off loans created in this way, let alone debt that has been sold to a third party needs their head examining. The debt collection agencies are constantly trying to establish joinder and trick you into a new contract. Make them a conditional offer – and ensure the conditions include producing the original note and showing accounting loss – they can’t so the offer is not taken. Simple!

        • that is not going to stop violent anonymous psycopaths turning up at your door unannounced, or you ending p in prison when u defend yourself….tried taking them to court 8 years now- result being yet another several thousand added to fictitious debts of about 10K + the original loans…..and lots of violence since…..not allowed benefits and not allowed to work, so prison or death is my only option there- but least of my ongoing problems at the moment!

      • it’s supposedly ILLEGAL to sell your private details to somebody else. if i lend a fiver to Paul, obviously it is a crime for some other mate of his i’ve never met called Robert, say, to kick in my door, smash my windows and beaten me up demanding sixty quid….

        but then again it’s probably still illegal to go around shooting people repeatedly in the head- so what?

  8. I chose not to do my degree after passing my HNC and HND because I couldn’t afford to. It would have only taken me am year- maybe two. Now I’m earning a reasonable wage, and probably could I don’t have the time.

    The question of fees is a purely political one; they do not want us educated and able to think. They want us servile, accepting and ignorant. Unfortunately, or perhaps fortunately, they fail to realise you do not need education to be intelligent. Education helps to access positions of responsibility and influence. Lack of education doesn’t stop us thinking. It puts me in mind of at least two people I knew who were illiterate, but could strip an engine and rebuild it.

    We can, and we will!

  9. That bit about the Government and, therefore the taxpayer standing as guarantor to a private company in the case of default, is the salt on an already very nasty wound.


    • Heartbreaking. We pay because our politicians voted that we would, and the politicians of Wales & Scotland made a stand for the education of their constituents. Westminster sold our right to an education.

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  12. Student numbers down, general populace less educated…..tory plan b a success!

    As for the legal side of it… they have probably been planning this sell off since they introduced fees and somewhere in the small print will be something which says they can sell your debt to anyone they want to.

  13. If they are prepared to write off more than 80% of these debts and sell them to their debt collection business chums, should they not be offering the same reduction to the students first?

    • It is probable the debt collection agency will offer a massive reduction anyway. They usually do so I understand. Three over charged me by about a hundred pounds a while ago and then after I cancelled my contract they carried on trying to take £15 a month out of my account. When I refused to pay it, partially because I had cancelled my contract and partially because they owed me over a hundred they sold it to a debt collection agency. They asked me for a third of what three claimed I owed them. In that light it seemed easier to pay it and then ask the ombudsman to intervene.

  14. English education has been renowned for centuries. For even longer than America has even existed. They are now discouraging English students from using English education. International students are still welcomed because they pay higher rates, yet at the same time they have to come to a country that is hostile to anyone from abroad. The idiocy at London Met when the international students were all told they couldn’t continue studying will have done a lot of damage there. If this government succeed in getting a second term it will be two decades before the education system here recovers.

    • Your understanding is incorrect. When the government set up the loans they did so in a way that allowed them to sell it on. That’s the terms of the contract, and they have used the terms.

      But I’m sure deep down you knew that anyway.

  15. It always seems completely wrong to me that you can take out, what is in effect, a contract with one party, who can then decide to sell their interest, so that you end up with a contract with someone else, having never agreed to enter into any contract with that third party. Like the above contributor, I do wonder if you could insist on paying back the money to the original lender and it would then be up to them to forward it to the third party? Probably not, but it seems to be wholly in contravention to normal contractual procedures. However, my knowledge of contract law is VERY limited. I would be interested to hear the opinion of an expert.

    • Normal contractual procedures allow the assignment of a party’s interest, unless there is something personal to the circumstances. In the case of a loan, why should you care whether it’s creditor A or creditor B wanting payment of the same amount under the same terms?

  16. I’m sure that I read a post a while ago, saying that you can refuse to recognise a debt that has been sold to a Debt Collecting Agency. I’m sure someone with more knowledge than me might enlighten us.

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