November 22, 2018

FT, I have two questions and one observation to make about the securitisation and privatisation of student debt in UK.

Sir, Thomas Hale writes that after “the biggest privatisation of student loans…the first of a series of anticipated transactions that stand to create a market for graduate debt in the UK, the parliament’s spending watchdog concluded the government received too little in return for what it gave up”. “Spending watchdog criticises student loans privatisation” November 22.

The Department for Education, DfE, answered it was “confident that we achieved value for money for taxpayers… as Student loans are designed so that borrowers only repay when they can afford to [which] only means many students will never fully pay back their loans”

I have two questions and one observation to make

First question: Before a student has his debt packaged into a security to be sold off to investors, should he not have the right to make a preemptive offer for it? Not that it makes a real difference but, emotionally it might not be the same for some to owe their government than to owe Goldman Sachs  their student debt.

Second question: If taxpayer should receive value for money for all these student loans, should not those who are supposed to help students to repay their debts, the professors, the universities also have some skin in the game? I mean at this moment it would seem they get all the benefits from the students taking on debt, at no cost or risk for them.

I recently tweeted: Have you ever seen a university stating a normal investment disclosure like: “Warning, if you pay us for your studies by taking on debt, you might not earn enough to repay it.” 

Hale writes: “Securitisation, a process where assets are packaged together and sold on as bonds to investors, ranging from pension funds to alternative asset managers”

It is with respect to that I would like to make an observation, namely that of reminding that securitization is basically like making sausages, the worse the ingredients, the higher the profits. So pension funds, please beware!