I welcome what Jeremy Corbyn had to say on education yesterday. But there was a big omission, which was student debt.
It's all well and good saying that students may not have to pay fees in the future.
And I, of course, enjoyed university on that basis.
But what of those in between who have student debt? Will they continue to pay? My answer is that I think that would be a big mistake.
The reality is that QE could now be used to repurchase the student debt that has already sold and that still in state hands owned by the Student Loan Company which in total now have a nominal value of about £86 billion. This is only just over a year's QE funding at present and I say 'nominal' because it is thought that up to 70% of all new graduates may never repay all of their loans meaning that the market price of this debt is way below the notional or nominal value.
If this was done then a three stage process could begin towards debt write off.
First the interest rate on the loan - which has always been too high - could be reduced to that which the government pays on this in the first instance - or 1% or thereabouts.
Second, to stimulate the economy a moratorium on debt repayment could be declared of, say, three years whilst the impact was reviewed.
During that period a decision would be needed on how to go forward whilst still funding universities appropriately. This may not result in free university in all case, but then it never was. It would however be much less than now and with different rates maybe for UK and overseas students (Scotland needs to be looked at as a precedent here).
The aim is straightforward:
1) To reduce private debt;
2) To encourage people into higher education;
3) To stimulate the economy by releasing money into current spending;
4) To give people the chance to buy their own house and save for a pension denied now by student debt repayment;
5) To guarantee new funding for the university sector - which is big overseas earner;
6) To give a massive boost to people's confidence in their future;
7) To do so at very limited cost as QE is available for this purpose.
Why aren't such radical polices being proposed is the question that needs to be asked, and I wish I knew the answer.
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Maybe they’re concerned that would simply be too much for voters, ignorant and ill-informed as they undoubtedly are on financial matters, to take in. Perhaps they’re concerned that, rather than be applauded for their perception, they’d be dismissed as fantasists. They’re politicians after all, and getting elected will be all the harder if it involves re-educating the public. Maybe they’re just playing safe.
What’s the point then?
And how long before 300,000 become very disenchanted?
Why do we want to encourage more people into higher education? What’s wrong with apprenticeships? As for boosting self-confidence, how does a graduate who can’s get a job after graduation feel? Or those graduates who only earn 20K a year almost a decade after graduation.
Accepted
This is not the point, at all….The Big picture. We can either have a country that is highly educated, vs a country that is not so highly educated, the former being more able to compete internationally than the latter. This means we *all* benefit as a nation.
However, it appears that the government would rather discourage people from attaining higher education, and more skill, by taxing anyone who wants to be part of this at 9% of anything they earn over £18k/year.
This is totally ridiculous… Education isn’t like smoking, drinking, driving, or any other vice that harms us. Education is the thing that breads innovation, high tech, profitable businesses… Its the thing that means we as a nation don’t have to go cap in hand begging the french to build us nuclear reactors. Its the thing that makes companies like King (maker of ‘candy crush’), who are doing their best to balance this huge foreign sector deficit we have.
If anything, the government should be offering lifetime discounts for graduates….not taxing them!!
If we really want 50% of school leavers to go into higher education, then we need some different forms of higher education. The traditional version of university, with independent study and extensive independent writing is too academically demanding for a significant proportion of our current student group. I work with struggling students in HE and there are simply too many of them who aren’t coping, who don’t actually like reading/study, get bored with academic ideas, have limited interest in their specific subject, have pretty much no basic study or self organisation skill, are only there because they’ve been told that’s how to get a job. Many of these students would do well with applied teaching and learning and they would not have to go through the spirit lowering process of constantly being told that what they’re doing is not good enough.
As an academic, I agree
It sounds good, but I am sure there will be individuals out there that didn’t go to university to avoid the debt, or worked a job whilst at university to keep their debt to the absolute minimum and other people that paid more than the minimum due to try to get rid of their debts as quickly as possible.
Those individuals, particularly the ones in the latter categories will question the policies above and feel aggrieved by them. To give any sort of illusion of fairness there would need to be something in this policy for individuals in the latter categories.
All policies always have people who lose out
That I am afraid is life
Probably the parents who paid up front for their children (wrongly I think) would be the main complainants. Debt forgiveness does tend to have such effects. I still think there is a lot to commend about such a policy.
Again – maybe if this is an era of ‘post truth politics’ – then the Left needs to start lying as well?
The Tories are lying about the NHS right now – they DO plan to undermine it and privastise it. Politicians lied about BREXIT. So lets all join in and learn a thing or two. They are still lying about Academy Schools.
So lets see Labour just concentrate on the reforms above and if they get into power THEN deal with the student loan business when they are in power (who knows).
Sorry to sound really cynical here but if people are too dense to seek out the truth for themselves you will either get the Tory free marketeers robbing them blind or a Left leaning party keeping their more radical proposals to themselves and then and only then bringing real change in when they are in power (if ever).
To be honest an electorate like ours deserves to be lied to in my view if they are so easily spoon-fed by UKIP and the Leave campaign and so easily manipulated by the craven Tory press.
I know which one I’d rather go with. In both cases it’s what each party isn’t telling us about what they intend to do or not that we should be intrested in. What a strange world we live in.
That’s what I thought Blair was going to do in 1997 – he was going to make fundamental changes. But he didn’t – he went after the Tory voters instead and this is how we have ended with our biggest opposition party arguing amongst itself whilst the Tories get on with their mischief.
Mr Murphy,
What are your views on Martin Lewis’s take on student debt. He generally describes it as a tax rather than a debt
I have a great deal of sympathy with that
But tax does not carry interest
It’s still considered a debt when trying to get a mortgage (at least in the country where I live)
I believe that abolishing current student debt is proposed as part of Jeremy Corbyn’s Education Reform proposals.
If it’s I haven’t seen it
And I tried to find it
I am also sure it would have been headline grabbing and it certainly was not
It’s not part of it at minute. I was at a hustings last year and he said it was something that he would like to consider doing. In my opinion we need to frame this within an overall debt reduction via People’s Quantative Easing and to include PFI in that. I know John McDonnell has talked about this.
Not that I am aware of he hasn’t…
Hi Richard i think it was on one of the Economic forum he was holding around the country. I’ll see if I can find which one and post a link to it.
Thanks
But that’s hardly a policy commitment
Hi Richard, I agree with your argument. Would you see this being part of a modern day debt jubilee as Steve Keen argues for?
In effect, yes
My researches into military history make me wonder whether in the 21st Century we might restore the old County and Borough Militia’s who did such valuable work in keeping the peace. If so then those going in for higher education could be required to register with the militia for say 25 years for purposes of civil order etc. and perhaps a liability for foreign service in an emergency. This would allow them higher education free of fees.
I don’t think so…..
A weaker, compromise suggestion would be to write off the debt by stages for public sector workers – teachers, nurses, etc. So that if you worked in the public sector for say 8 years, the debt would be gone. I calculate that currently for every pound a teacher is alleged to receive, 49p goes straight back to the Government (61p of every pound the school notionally receives)
I am not sure why it would be necessary to discriminate in that way
“I wish I knew the answer.”
I’m sure you do. They’re all worried about where the money is going to come from.:-)
QE isn’t meant for the likes of them. Thats what they think. Despite what they say about the neoliberals they still have the idea that government is like a household and that spending on education can only be what is raised from taxation.
That’s going to take some shifting.
Having said that, we should make the point that we shouldn’t provide one education course after another free of charge and have a situation where young people aren’t entering the workforce properly until they are nearly thirty. That’s not at all unusual. We do need someone to do some real work to keep things going. But, it’s often the lack of paid employment that creates an unnecessary additional demand for full time higher education.
Many younger people would be just as happy working and studying part time as they would going to university to study full time. That used to be an option, but is much less so now and we need to look at how we can guarantee everyone something that suits them, and not what ‘progressive liberals’ think they should have.
I think that quite a good point
Why going to university has to mean moving to the Other end of the country is a good question,mor example. It clearly suits some but it’s never been the custom in Scotland and is not in many countries
Although I am aware of all the social advantages
Thoroughly agree with your suggestions on student debt. It might engender a discussion about where money comes from.
Even if it doesn’t, what has Labour to lose? Only radicalism by being too orthodox.
And who, amoung the upcoming generation, thinks that is a good idea?
This would in effect be a large transfer of money from the state to relatively well-off people.
In terms of freeing up spending- the repayments are relatively small amounts of money… and many of the savings to ex-students would presumably be saved rather than spent.
I’m not sure this policy would be all that efficient a way of generating increased spending compared to (for instance) building roads/airport/infrastructure…
We disagree
And you think most graduates are relatively well off?
Time to think again, I suggest
In 2015 graduates earnt 9000 GBP more on average than non graduates. Amongst the young that figure is 6000 GBP.
An IFS study shows a similar difference.
So yes graduates are relatively well off.
And they effectively pay 9% more in tax
I think the point rk was making is that a write off of student debt won’t help the less well off graduates because these people were never going to earn sufficient sums to repay anyway. The people it will benefit however are lawyers and bankers who would otherwise have been liable to make loan repayments.
I agree that benefits will vary but I happen to think the biggest benefit is to those on lower pay who will otherwise pay for more than 25 years in many cases
You may have lost interest at this point- but I think it’s worth underlining that change would be quite regressive.
As you put it- there’s effectively a 9% tax on earnings over 21,000- under the Plan 2 repayment. (That’s not the same as paying 9% more tax of course).
So essentially you’re advocating a tax cut for those earning over 21,000 with graduate degrees… (who are more likely to be higher earners in future).
But remember also that if you don’t repay the debt in 25 years with these ‘taxes’ it gets written off anyway.
So the greatest benefit of your policy change is going to those with high enough incomes to fully pay off their student debts. For an average student debt of 44,000 – that means people earning over 36,840/year on average over the 25 year period.
See another comment already made
How would you plan to do it? You presumably wouldn’t do it in one block, ie use a whole year’s QE spending on graduates? I think you said that 70% of student debts are never fully paid off but what percentage of the total student debt is paid off? There would be no benefit to the economy in cancelling a debt that was never paid off, would there, but I suppose there’s no way to target it. In fact targeting it might result in giving money to those who were better off anyway, would it? Sorry if these questions are a bit naive, I’m just trying to understand.
As I suggested, it could be done over a number of years – indeed, it could be done over the life of the debt
There is no reason why not