Comment & Analysis
Feb 12, 2017

Be Wary of a Funding Model that Sells £4 Billion of Student Loans to Investors

The UK’s decision to introduce the private sector into the student loan market undermines any argument in favour of loans.

By The Editorial Board

The UK government has announced it is to begin selling off £4 billion of loans that first become eligible for repayment between 2002 and 2006. This is the first of a four-year programme of loan sales to take place.

This should be worrying for a number of reasons. Firstly, this allows loans to be snapped up by investors looking to make a profit from a bond made up of student debt. Ideological opposition aside, such a move raises legitimate fears about the future of loan schemes. Largely modelled on a US system, by selling their loan book to investors the government is creating a model that might easily be reshaped in the future to meet the needs of investors and a cash-strapped exchequer.

For a country so often influenced, whether consciously or not, by the UK, we should be concerned about higher education developments there. The radical hike in fee levels in the UK was an experiment that caused concern from all corners, and one that was pushed through with an ideological stubbornness not often seen in Irish politics.


Many people, our own Provost Patrick Prendergast included, have said that they want to see a uniquely Irish higher education funding model. The Minister for Education, Richard Bruton, has said he wants to create the best education system in Europe in the next 10 years. Yet it is hard not to feel that policy makers will always have on eye on how well the UK system is performing. Few governments wouldn’t be interested in a system that the UK government has suggested could generate £121 billion by 2021.

Those who support loan schemes have traditionally been disappointed by the policy-decisions of governments and policy-makers. As Prof Nicholas Barr from the London School of Economics (LSE) has told The University Times about the UK system, “at every other turn, if British governments could get it wrong, they did.” As if we needed reminding, the last few days in Irish politics have given us a perfect storm of reasons to be wary of government agencies and institutional incompetence. By introducing the private sector into an already complex relationship between students and the state, we’d be laying the foundations for problems in the future.

The introduction of private interests into the loan system will only further alienate those families and young people who still remember the fallout of the 2008 crash. Debt, loans and private investors all sound far too familiar to those who are already wary of the risks of higher education.