Student Loans - The Giant Scam That Robs the Nation

08/10/2012 23:01 BST | Updated 08/12/2012 10:12 GMT
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It was a grand project of current JP Morgan Director, Tony Blair, in one of his previous employments as British prime minister: make university education open to the many. The many here was meant to be 50% of the young now going through education. The plan included making students pay for their higher education through loans.

As a result students now going through university will emerge up to their eyes in debt and this debt will dog them for years.

Leaving aside the question of whether we really need 50% of our young going to higher education, let us ask whether there is any alternative to making people pay for higher education.

Education is an investment. Everyone is agreed on that. An investment, let us remind ourselves, is simply this. You place money in a certain way by purchasing a good or a service and you expect to see a return at some later date on the money you placed.

Let us consider education as an investment in two ways:

  1. As an investment by an individual
  2. As an investment by the state.

At present, it is the individual who makes the substantial investment in higher education. The student buys his or her education by taking out a "student loan" and then has to repay that loan during their working life. Thus, at present, the state invests relatively little in higher education. The investment is seen purely as an individual matter.

Now look at education as a different kind of investment: an investment by the state. In this, the government finances the education of students. How does a government investing in education today get its money back? Simple. Through future taxation. The economy needs an educated workforce in order to compete and prosper in the future. Without that, we will go into decline and so will government tax revenues.

Clearly we will never be able to carry out a watertight accountancy exercise to show that investment in education is a "good deal" for the government. Any attempt to put figures on the matter is foolhardy. You cannot quantify the benefits that ensue from having a well educated population. If you want to appreciate all the benefits you have also to put into the equation that free education means social mobility and so the nation benefits from talent that would otherwise be wasted, and many other benign effects. The associated benefits are as enormous as they are unquantifiable.

But in any case, the strong likelihood is that the government will collect sufficient returns on its investment visibly through taxation. After all, if it works for the individual, it must also work for the government, and for this reason. By the government investing it has one big advantage over the individual - the interest rate on the loan. Under the present economic model the government would finance the education through bond issues which would attract a much lower interest rate that the individual student loans.

The Democratic Republican Party proposals would do better than that. They would change the whole financial system and the government will not raise the money through bonds issues but through direct money creation.

Now come back to the question: why do the current parties favour putting people into debt in order to take higher education? To answer lies with the banks and the non-taxpaying global superrich. These are the real drivers behind the current policy of massive student indebtedness. They have an insatiable need for debt that they can buy and profit from and the £1 million a year JP Morgan Director we mentioned at the beginning of this piece was an enthusiastic promoter of their interests when a holder of political office, prior to taking up his official position among their ranks.

Many people think that the reason for students paying for their education is to avoid government debt. But this is not the real driver and never was. Blair expanded the student population and at the same time forced them all into debt. This was neither an educational programme nor a social mobility programme but part of the ongoing process of the "financialising" all of our citizens lives burdening us with grinding debt transferring wealth from working people to the superrich.

The proposal that the state must see education as an investment in the nation is not in any way radical. It used to be received opinion. But since the 1980s the financial markets have cried out for more and more financialisation of every aspect of our lives. Their servants in politics have contrived to deliver exactly what they want. Regardless.