The government is failing to solve the student loan problem


As someone who is going to graduate in possession of a fairly large debt, the idea of others in a similar situation being misled or perhaps coerced into taking drastic action about their debt makes me a little uneasy to say the least. One of the groups misleading students about their loans was, it turns out, the Student Loans Company (SLC) itself. Over the last nine years, the SLC sent out letters posing as debt collection notices under the name of Smith Lawson and Company Recovery Services, which claimed to act on behalf of the government as their client. In fact, this mysterious company is merely a subsidiary of the Student Loans Company. These are the same tactics used by payday lender Wonga to recover their debts, although unlike Wonga’s companies, Smith Lawson and Company is a registered trading company.

The letters from the SLC have been sent to 309,000 students whose debts fell into arrears. The stir was created because, by using a different name, it seemed as if the loans had been turned over to a third party debt collecting service. Clearly this practice, although on the face of it completely legal and can be washed over, is underhand and frankly dishonest. The chairman of the Student Loans Company offered to resign over the issue but it was decided, since the practice has been going on for nearly a decade, that blame couldn’t be apportioned to just him. It’s not hard to see why; the blame game is not going to achieve anything in this case (and it could be debated whether it achieves anything in most cases like this). What’s important is ensuring that the right information is given to ex-students in need of it, rather than information designed to scare them into repayments which might lead to rash actions and undue worry.

This is not the only issue that has been circulating around student loans in recent times. The sale of the student loan book is a topic that incited students across the country into protest last year. It seems, however, that the business secretary Vince Cable got cold feet regarding the issue and, rather than selling student debt to private companies, is now promoting the idea that the universities themselves shoulder a large proportion of the expense. It all seems muddled and as if the government doesn’t really know what to do with the problem. As a business select committee said of the student loans situation, the “government is rapidly approaching a tipping point for the financial viability of the student loans system.” Now if that doesn’t sound ominous as to the future of student loans, I don’t know what does. The committee went on to say that student loans are too generous (the government is, on average, losing 45p in every £1 they lend in student loans), and yet the whole idea behind the system is that no one should be unable to go to university due to economic circumstances. It’s something of a Catch-22 and is creating the potential for a very large black hole in the state budget.

Of course, the way the government runs its business is not my primary concern. Fighting words such as “financial viability” concern me the most not because of the money it might cost the government, but because of the potential for financially disadvantaged students to severely lose out on the chance to go to university. This idea doesn’t really match up to the government’s plan to expand university places by removing the cap on student numbers. Once again, it seems, the question appears to be – where is the money going to come from? If students and young people have any say at all in the costs of their education and issues surrounding repayments, hopefully it will not hit us where it hurts the most.

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