Secretary of state for business, innovation and skills Vince Cable MP has denied that the Government is planning to raise the interest rates of loans taken out between 1998 and 2012.
News emerged last week (14 June 2013) of a Government-commissioned report which recommended that it hike interest rates of student loans taken out by 3.6 million people from 1.5 per cent to 3.6 per cent.
Today, Cable released a short statement denying that the Government was considering the recommendation, although he did concede that it is looking to sell student debt.
He 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.”
He made no comment on whether the government would ever hike interest rates for loans taken out from 2012 onwards.
According to The Guardian, the report apparently contained a suggestion of how ministers could persuade graduates to accept the interest rare rise. It said: “We all live in difficult times. You have a deal which is so much better than your younger siblings”.
The National Union of Students (NUS) issued a statement at the time, saying that students would be “enraged” by the proposals.
President of the NUS Liam Burns said: “The Government must immediately rule out this outrageous suggestion. Despite pushing them to establish in law that conditions on student loans could not be altered retrospectively the Government refused and gave weak assurances that they had no plans to do so. Now we see their own advisors are suggesting that very move.
“By raising tuition fees the Government shifted much of the cost of education onto students, and these proposals would hit recent graduates. When are those who benefited from the boom years going to take their share of the burden like David Willetts said they should before he was in Government?
“Students and graduates will be understandably enraged by these proposals and many will see it as the final betrayal by a cabinet ministers who benefited from a free university education.”
The report was obtained under a Freedom of Information request by anti-cuts website False Economy.