Opposition mounts to Oz plans for student loan sell-off

Privatisation of debt dubbed a ‘silly idea’ by critics

November 7, 2013

Proposals by the Australian government to sell off its student loan book have prompted protesters to march on Prime Minister Tony Abbott’s Sydney office.

The country’s right-of-centre Coalition government, which came to power in September, announced last week that it had appointed a “commission of audit” to consider the further privatisation of federal assets, including the A$23 billion (£13.6 billion) it is owed by students.

Christopher Pyne, Australia’s education minister, cited the example of the UK, which held two sales of its pre-1998 “mortgage-style” student loan portfolio in 1998 and 1999. Plans for a further, larger sale of such loans scheduled to happen between 2008 and 2011 were shelved because of market conditions, but were revived earlier this year.

Whitehall also announced in June the planned sale of pre-2012 income-contingent loans, which it hoped would raise £10 billion.

The disclosure came just a fortnight after it was revealed that an unpublished report ministers had commissioned from the investment bank Rothschild suggested that the state raise interest rates on student debt and guarantee financial returns to investors, although the government insisted there were no plans to change terms for existing borrowers.

According to The Australian, Kim Carr, Labor’s opposition higher education spokesman, said the idea of selling off the loan book had “failed” in the UK.

He also feared that any sale of Australian student debt would be accompanied by harsher repayment conditions.

Interest rates are currently capped at inflation and no repayments are required from those who earn less than £30,400 a year, compared with a current repayment threshold of £16,365 for pre‑2012 debt in the UK. Nearly 20 per cent of the Australian loans are expected never to be repaid.

Mr Carr said that any such sale would only make “economic sense to a purchaser…if they can make money out of it. It would have to involve higher charges for students via increased interest rates or altered terms of repayment.”

Mr Pyne’s floating of the sale idea prompted protests from students in Adelaide, Melbourne and Sydney. A small group in Sydney marched to the prime minister’s office.

Gavin Moodie, principal policy adviser at RMIT University, dismissed the sale as a “silly idea”, as Canberra could borrow much more cheaply than any potential buyer. He also argued that since Australia’s debt was only per cent of gross domestic product – compared with about 90 per cent in the UK – it had plenty of capacity to borrow more if it needed extra funds.

He suggested that Mr Pyne had proposed the sale to make other changes to student loans “more palatable”, such as “lowering the repayment threshold, increasing repayment amounts, or recovering debts from former students’ estates”.

Conor King, executive director of Innovative Research Universities, an Australian mission group, said that by introducing an extra interested party, any sale would make changes to repayment conditions in either direction even more politically difficult.

However, he doubted that the seven-member commission of audit, which is scheduled to report in March, would find “significant value” in the sale, and he did not expect it to go ahead.


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