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Sale of Student Loans Bill

I would like to say a little about the effects of the Bill on young people in low-income families because I was alarmed to learn that 18 per cent. of the population of my constituency have NVQ level 4 or above, compared with a national average of 27 per cent. and an average of 30 per cent. in the south-east. When I speak to young people in my constituency, I tend to get a stock response that they are worried about being saddled with excessive debt, which they have no realistic chance of repaying. A more fundamental problem is that they do not view higher education as worth the expense. That is not helped by press reports about the sparsity of well paid graduate jobs. Although I support the principle that those who benefit from higher education should shoulder some of the cost, the statistics on participation rates in my constituency seem to represent a huge waste of talent. It worries me that the financial barriers to further education are still not being broken down rapidly enough. I want to raise the potential for a new commercial owner of the student loans portfolio to increase interest rates on that asset to market rates, instead of maintaining the current subsidised inflation-linked rate, once the portfolio of student loans has ceased to be a public asset and been transferred to the private sector. We have all read in the newspapers about the impending credit crunch in the financial markets, which will bring the deteriorating availability of credit for companies and households and the increasing cost of borrowing throughout the economy. Clearly, the financial organisation to which the student loan portfolio will ultimately be sold as a result of the Bill expects to make a profit from the assets, and I wonder whether there will be a temptation in the current lending environment for it to boost interest rates on student loans to market rates once it has assumed economic ownership. With the London inter-bank rate at around 6 per cent. and the interest rate on student loans at 4.5 per cent.—a differential that, according to estimates by Professor Nicholas Barr of the London School of Economics, equates to a subsidy of about £1.2 billion a year—I wonder how any commercial organisation can agree indefinitely to offer loans at more than a full percentage point below the rate in the wholesale financial markets. The risk is that students will at some point face commercial rates on their student loans. A rise in interest rates of 2 per cent. to bring the terms on student loans in line with those attainable in the broader financial markets could equate to an extra £300 a year in interest charges on the average debt of £15,000. Finally, I should like to talk briefly about publicity schemes for low-income households. The Government claim that they want a participation rate of about 50 per cent. by 2010, but given the low rates of participation in further education in my constituency, I wonder whether more investigation is needed of the accessibility and visibility of the information on bursaries for students from low-income households. If we aspire to a fully meritocratic society, in which the financial circumstances of a person's parents are no barrier to educational opportunity, and if the perceived cost of university or further education is dissuading many from attending, should we not analyse whether more needs to be done to publicise the financial assistance schemes that might be available to those on low incomes?