Cable rules out hitting existing graduates on loan interest

Vince Cable, the business secretary, says he has “ruled out categorically” any rise in interest rates for graduates who took out student loans before 2012, while stressing that plans for a sale of student loans are ongoing

June 18, 2013

The Liberal Democrat MP released a short statement today following national press coverage of the government’s plans for the sale of the student loan book.

The coverage revealed that a government-commissioned study, conducted by investment bank Rothschild, included an option to increase interest rates for 3.6 million borrowers who took out student loans over the past 15 years.

Increasing the amount that students repay into the loans system would make the loans more attractive to prospective private buyers.

Mr Cable said: “I have ruled out categorically changing the terms of interest rates charged to graduates with existing student loans taken out before 2012. The Rothschild study which was completed in 2011, was a feasibility study which looked principally at how to sell the student loan book. Work on the feasibility of selling the outstanding student debt continues.

“However the study also contained a proposal which suggested a change in interest rates charged to existing students - that proposal was comprehensively dismissed two years ago and will not be taken forward by this government.”

But the wording of Mr Cable’s statement appears to leave open the possibility that the government could change the terms for post-2012 borrrowers.

Mr Cable’s statement may, in part, be a recognition that the Lib Dems can ill afford further unpopularity with student and graduates. The party suffered severe damage over the coalition’s introduction of £9,000 fees, the majority of its MPs having broken a pre-election pledge to oppose any rise in fees.

The sale of the loan book, and changes to loan terms, may be figuring in ongoing talks between the Treasury and the Department for Business Innovation and Skills ahead of the spending review, to be held on 26 June.

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