A spending watchdog has recently reported that the level of unpaid student debt in the UK is set to exceed £200bn in the next three decades. The report – coupled with the recent privatisation by the government of nearly £1bn worth of student loans – has served as a reminder of the inability of the capitalist system to deal with a crisis of its own causing.
The student debt bubble
The outstanding student debt currently stands at £46bn. Meanwhile, it has been estimated that roughly 50 per cent of students will be unable to repay their entire loan under the new tuition fee structure, introduced back in 2012. This figure is only expected to rise over the coming years as ever greater numbers of graduates find themselves unemployed or stuck in low-paid jobs.
The Tory-led government have brutally attacked Higher Education (HE) funding over the past few years, transferring the bill almost entirely onto the shoulders of graduates, whilst simultaneously crippling the ability of these same young graduates to repay their loans. In this way, the political representatives are through their austerity measures manage to perpetuate economic crisis instead of solving it.
Youth unemployment is at an all time high and wage payments at an all time low. Subsequently, those who have recently graduated are in a financial position so unstable that they fail to reach the minimum earnings cap at which repayments of their loans must begin – roughly £16,000 per year.
As debt mounts up, ability to repay debt goes down – along with economic demand also. Graduates cannot balance debt repayments with wage reductions; they simply don’t have the money. By placing the onus of austerity on their shoulders, the economy continues to shrink as their ability to feed growth is limited.
Once again we see a system that is kept going solely on borrowed time and money. The crisis in HE funding has been delayed at the current time through a massive expansion of student debt – debt that cannot and will not be paid back in the future because of the problems of unemployment and low wages experienced most acutely by young people. The swelling of this debt bubble helps to illustrate the contradictions of the capitalist system, which avoids crisis in the short term by sowing the seeds for greater crisis in the future.
Yet the ruling class have no other option within capitalism: without this burden of debt being placed in the hands of students, HE services would have had to be cut back even further than they already have, resulting in the closure of entire departments and universities. But such services are essential to capitalism itself, which relies on a stream of workers with a certain necessary level of education for the functioning of modern production. Such is the parasitic nature of capitalism in crisis – a system that wants to have its cake and eat it too.
Privatising for profit
The government’s decision to sell a portfolio of student loans tracing back to 1990 and worth £900m is another example of parasitic nature of capitalism, which seeks to make a profit out of every possible avenue in society. It is also a clear indication of how this government acts to protect the interests of the ruling class.
Sold for £160m to a consortium of private agencies, the loan book was auctioned off at a fraction of its total worth – roughly 17 per cent of its estimated value. The move has been justified by government minister David Willets as a necessary measure to “reduce public debt” and to free up the Student Loan Company from its obligation of collection, so that they may instead focus on their main duty of provision.
Facing the burden of such a high level of unpaid debts, making the loss more profitable through the sale of the loans to private companies was apparently the government’s only option.
The sale is a cynically masked attempt to privatise yet more of the country’s publicly controlled assets, as the capitalists to make as much profit as they can from the exploitation of workers and youth in this epoch of capitalist crisis.
By allowing such privatisation to take place, the government will effectively open the door to companies to make the task of debt collection more profitable through the application of increased interest rates on student loans. Although the Coalition’s Business Secretary Vince Cable continues to deny such a change will happen, the government’s history of broken promises on the subject of university fees will offer scant consolation to many.
The sale of the loan portfolio is another casualty in a long list of state enterprises recently privatised, such as Royal Mail earlier this month. It allows private companies to pursue profit through previously state owned institutions under the guise of cutting costs for the government and increasing efficiency.
The pretence of helping the Student Loans Company in this case provides a convenient excuse for another attempt by the Tory-led Coalition to try and bleed the country dry of its remaining public cash.
This drive for profit embodies a greedy, yet unsustainable attitude. As the government see student wage payments and employment go down, they see their opportunity to make their profit go up by justifying privatisation as a result of unpaid debt.
Forcing higher interest rates on former students may serve to make the debt collectors’ endeavours profitable in the short term, but you cannot squeeze blood from a stone – graduates, already facing declining living standards, will face a point where default on their student loans becomes inevitable. Martin Freedman of the ATL teachers’ union said the measures would only result in “unbelievable” levels of debt, which indebted students are not capable of paying.
As interest rates are hiked up and repayment dates pushed forward, the amount of return that can be expected from recent graduates diminishes, as well as public tolerance for the measures.
The insatiable appetite for profit accumulation by the bourgeoisie even in times of capitalist crisis will mean that greed will eventually lead to even greater crisis in the future.
The wealth gap is being forced to greater extremities in austerity Britain with every month that goes by. The ruling class are nurturing the revolutionary conditions of their own downfall, as workers from all corners of society lose tolerance with a system that throws living standards backwards. The short-sightedness of the capitalists will eventually lead to their loss of everything, all for the sake of short term gain – the inevitable result of the drive for profits that forms the laws and logic of capitalism itself.
The bourgeoisie are blinded by their own frenzied desire for wealth to the extent that they use the very splintering of their own system as an opportunity to make more.
With an estimated £41bn worth of remaining student debt expected to be auctioned off in the next decade, the ‘hungry hungry caterpillar’ of capitalist accumulation will eventually find itself chewing not on more profits, but on a fuse – the revolutionary fuse ready to spark the nation’s anger.
By Jack Hardy, Leeds Marxists