Tuesday, 12 July 2011

Martin Lewis on Student Debt.

This is a talk given by Martin Lewis on the increase of tuition fees to £9,000, the changes to the student loan system and what he sees as the popular "misunderstandings" in the debate over student debt and the fee rise. The expert on personal debts is keen to point out that the individual will pay back a greater debt at a lower rate over a longer period of time, so it would not impact on the ability of the individual to take out a mortgage. The function of the greater debt instills passivity, at best, as people who will be paying-off a debt over a long period of time are unlikely to go on strike or demonstrate. If you're in debt you've got to get a job to pay it off, you can put aside your dreams as any job will do and serious political change is not necessarily in your interest. So a bigger student loan adds to the pressure of the debt accrued in the form of a mortgage, credit cards etc.

It is not that the debt incurred by a student loan is the same as a credit card or a mortgage, but it contributes to the amount of debt which one may accrue over the years and spend one's life paying-off. The additional £30,000+ debt will contribute to the overall debt of someone who takes out a mortgage, credit cards etc. As a great number of people do in this debt-driven economy. It might not make that much difference every month, but it's something that's going to be hanging over you (along with your mortgage, credit cards etc) for most of your life. According to the kind of argument Martin Lewis puts forward a person could have a £500,000 student debt and it not affect the way they live, because "rationally" they pay less a month and no one will ever repossess their property. To suggest that the amount of student debt does not in any sense "burden" an individual, even if it just a psychological burden, is ludicrous.

It is important to keep in mind that government debt amounts to around 70% of GDP whilst the public funding for higher education is 0.7% of GDP. So even if universities were completely privatised and tuition fees were adjusted to cover all the costs, the most it would achieve is lower government debt by 0.7%. The implication being the Coalition's claim of 'necessity' is spurious, as a rise in tuition fees and cuts to funding for universities would have little impact on the debt. Though it will contribute to the debt per household, which is estimated to rise by £245 billion as a result of the cuts. If there is no reason for tuition fees to be raised, then there is no reason that the loan at £3k could not be adjusted to include the benefits which the "saving money" expert described. I think we may have to re-assess our faith in experts who have 'real issues' with the interest rates and the early redemption penalties.

The points Martin Lewis made are largely irrelevant as the presupposition of the talk is that the Coalition has a legitimate case to raise tuition fees and cut funding for higher education. The only reason there was even a space for such a discussion is because the points being made are within these safe conventions. The fact that there is no real justification for higher tuition fees will not be raised and has been completely submerged in the media coverage around the cuts. Instead Lewis informs the "mistaken" rabble that they are wrong about the tuition fees and that the rational option is to support the reforms for there positive attributes. If the government wants to alter student loans so that we pay less each month over a longer period of time there is no reason why it can't be done with less debt or even the same amount that we'll have. Though there weren't even any economic reasons for tuition fees to begin with.

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