Interest on student loans

The Treasury and Joe Johnson do not seem to have grasped the concept of lending money to students as a social act, not a commercial one. Recovery of the loan from the higher-paid is the equivalent of a graduate tax. This exchange took place in the Commons during a session on the subject of the Student Loans Company:

• Robert Halfon (Harlow) (Con)

  I welcome the Minister’s efforts to reform the SLC, and he will know that our Select Committee on Education is doing a value-for-money inquiry into universities. As well as looking at the management of the SLC, will the Minister use this opportunity to look at reducing the rate of interest for students, which is much higher than in many other countries in the developed world?
• Joseph Johnson
• We keep all aspects of our student finance system under review, to ensure that it is fair and effective as a system, and that it is meeting our core objectives of removing financial barriers to access, funding our university system fairly, and sharing the costs of doing so equitably between individual students and the general taxpayer. The rate of interest is heavily subsidised. This is to be compared with unsecured personal commercial borrowings. The Bank of England benchmark reference rate for unsecured personal commercial borrowing would be well over 7%, and this is a particularly unique product, which is written off entirely after 30 years with no recourse to a borrower’s other assets, and it only enters the repayment period when people are earning more than £25,000. So it is a unique product, and it is not easy to compare any element of it with loan offerings from elsewhere in the commercial sector.

  
  

It seems to me that the interest charged should be more in line with that paid by public sector bodies, not the commercial sector.