The bubble of student debtApril 24, 2014
This month the Institute for Fiscal Studies (IFS) published a report which confirmed that charging £9,000 tuition fees is actually going to cost the government more money than the old system used to. Alongside the arguments for free education, Marxists pointed out at the time of the fee increase that even from a capitalist point of view increasing tuition fees was a shockingly short-sighted policy. Sure enough, the report finds that just 55% of the costs will be recovered by loan repayment, as against the 72% estimate given in 2010.
73% of people will never fully pay back their loans, compared to just 32% under the old system and the average amount of debt written off per person will be a stunning £30,000. This is despite the fact that people will now be repaying these debts for 30 years, as opposed to 25 years under the previous regime. Coupled with the above inflation interest rate that is now applied to student loans, this will leave many people still repaying large sums of money into their 50s and yet still not having cleared the whole debt.
The reason for this state of affairs is the appalling job prospects for today’s graduates. Student loans are only repayable once the graduate is earning over £21,000 per year. For many graduates today, just finding a job is hard enough, let alone one that pays over the median wage.
Last year the website careermatters.co.uk published research which said that almost 6 in 10 graduates left university without a job, and that employers were receiving 56 application for every graduate job. 19% of students recently graduated were unemployed, with a further 36% in low-skilled employment. Furthermore, according to the ONS, average hourly earnings across the whole of society have fallen by 8.5% since 2009 and now stand at the same level as they were in 2003.
The crisis of capitalism has thrown wages and employment conditions backwards by at least a decade, and with just 40% of the planned cuts implemented so far and the most anaemic and fragile recovery capitalism has ever seen, things are only going to get worse in this respect. Basing a plan for higher education funding on the assumption that young graduates will be able to pay more than they were before, during a period of capitalist boom, is pure fantasy.
We are now faced with the familiar prospect of ordinary people being forced to pay for the short-sightedness of the representatives of capital. Faced with the enormous debt bubble and inevitable crisis thanks to an even larger bill for higher education than before tuition fees were trebled, any government that accepts the logic of capitalism is going to be forced in the future to cut the higher education budget right down to the bone, and another increase in tuition fees is clearly on the cards. It is patently clear from what has happened already that this is no solution to the problem, and yet it is the only option a capitalist system in crisis can offer.
This conundrum for the bourgeoisie is a symptom of the crippling spiral of contradictory decline in which capitalism is enmeshed. Under capitalism the only path is austerity – making ordinary people pay for the crisis of capitalism. But this does not solve the fundamental causes of the crisis and only paves the way for larger crises in the future by, among other things, inflating debt bubbles. This is what we face in the higher education sector and in the economy as a whole.
These economic crises lead to social crises, and just as tens of thousands of students mobilised against the Tories in 2010, so future movements will be kindled by further attacks on education in the interests of big business. But next time the student movement will not only have the benefit of its experience of four years ago, it will also be in a much stronger position to unite with the broader working class, whose struggle is the same as ours and has intensified since 2010. Together we will fight for the socialist transformation of society to guarantee free education, full employment and a better standard of living for all.
by Ben Gliniecki