Government thinking about selling student loans
The government is looking at selling the student loans scheme.
Alliance Education spokesperson Dr Liz Gordon today released Ministry of Education briefing papers saying 'securitisation' of student loans is 'an option'.
Securitisation is a technical term for bundling up the $3 billion of outstanding student debt and selling it to private investors.
The proposal is contained in briefing papers presented to the Minister of Education last year.
Three options were looked at for reducing total debt. A 5th August 1998 paper headed 'Student Loans Scheme Paper B: Longer Term Initiatives' contains a table summarising options. Option 7 is to 'Securitise (sell) debt of high income borrowers'.
However officials were not able to fully evaluate the options, and said 'a full analysis of securitisation would need to involve extensive consultation with the banking and securities industry'. Consultation with students or borrowers was not proposed.
Securitisation was also mentioned in papers on the 5th of June, 15th of June, the 23rd of July and the 14th of October 1998.
Liz Gordon said that the sale of the student loans scheme would severely limit the ability of a new government to provide relief for borrowers.
"It would throw students borrowing for their education to the mercy of the market.
"If the government sells the debt it will have to give the banks a substantial discount to account for loans that will not be paid back. The government would essentially be forcing students into massive debt so that it can offer tax cuts to high income earners with the cash raised from students.
"The government is looking at these madcap options because the debt is out of control.
"Instead of making the scheme workable the government is looking to squeeze as much cash out of students as possible so that it can spend it bribing voters with tax cuts," Liz Gordon said.