With top-up fees just around the corner the government has decided it needs to make some changes at the Student Loans Company (SLC). Higher Education Minister Bill Rammell’s office blasted out a press release claiming the new system would provide, ‘Clearer information, faster decisions, timely payments, and accurate repayments’.

This all sounds great, except that the most pressing problem the SLC wants fixed is one the government seems intent on ignoring. At issue is the fact that the SLC, unlike every other financial organisation in the UK, does not share information about its borrowers with credit reference agencies. So a student can have a loan with the SLC and not be paying it back, but still apply for credit from any high street bank, who can’t be told by the SLC that this person is a credit risk.

When we asked the SLC whether the changes announced by Bill Rammell would rectify this, they replied that they had asked the government to change the legislation, ‘to ensure we are engaged in responsible lending’, but that, ‘Thus far, the government does not propose to accept the SLC’s proposal’. So the government is promising clarity to somebody (possibly students who will be in hock to it) but not to the financial community. While this seems completely illogical, perhaps the rationale in hiding this problem from the wider financial community is that the Labour Party and particularly, aspiring Prime Minister Gordon Brown, don’t want any bad news stories about education and finance right now (unless they can blame them on Tony Blair).

Another SLC story the government seems loathe to discuss is the sale of two tranches from the SLC’s loan book. One piece worth £1.03bn was sold to Honours Student Loans, a company owned by Deutsche Bank and the Nationwide Building Society. The second chunk, worth £1.02bn, was sold to a company called Finance for Higher Education Limited. This is a subsidiary of Higher Education Securities Investments Series No.1 plc, owned by Capita Financial Trust Limited, who are in turn owned by Capita Fiduciary Group, and at the end of the line is the Capita Group. Yes, the same company who have won huge contracts under the present government (including the ill fated Connexions Card) and whose Chairman has taken early retirement because of controversy over his personal £1m loan to the Labour Party.

The introduction of Top up Fees will see the value of loans held by the SLC explode, well beyond the £15bn it already owns. With such huge sums involved, it seems little wonder that the government is very keen to try and isolate any shocks from this debt, triggering problems in London’s finance markets. By happy coincidence the SLC have told the assignment that they are ‘not aware of any plans by the government’ to sell off any more of its loan book.

www.capitatrust.co.uk
www.honoursstudentloans.co.uk
www.slc.co.uk