Why you should care about the student loan fire-sale, even if you aren't a student

Danny Alexander is out to get the worst return for your investment he can.

The announcement that the student loan portfolio is going to privatised has, rightly, sparked a huge response. It is a terrible idea, which will come back to haunt future governments and current graduates.

But the worst of it isn't the effects on graduates themselves – at least, not the direct ones.

The sale of the loan portfolio doesn't mean an immediate move to a US-style system of student debt. As far as we can tell (the proposals will need to be much more fleshed out between now and 2015, when the sale is planned to happen), the debt collection will continue to happen through HMRC, and at the same rates and with mostly the same rules as now. That means it will still be wiped out when a graduate gets old enough, it will still be paid back at 8 per cent of earnings above a certain threshold, and it will still not really count as debt you should be afraid of.

But there are two key problems which graduates might face as a result of the sale.

The first is the much-feared "sweetener", a change which the government might make to the student loan deal to make it a better proposition for commercial investors. As suggested in the secret Project Hero report, uncovered by the Guardian earlier this month, one possible sweetener is to remove the cap on interest rates, thus massively increasing the potential amount graduates would have to repay. The Project Hero suggestions are that this should be retroactive, affecting every graduate with outstanding debt.

Hopefully, that plan won't be put into action. Vince Cable, the business secretary, says the suggestions has been "ruled out categorically". A promise like that doesn't carry much weight from a Liberal Democrat, sadly, but maybe this time it's one they'll actually keep.

The reason to doubt them is the second thing that graduates should be wary of: commercial pressure.

The student loan contracts are mutable enough that nearly any change can be made to them. And once they have been sold, there will be a private company with a multi-billion pound investment in maximising their return from them. Any model of government power will tell you that a policy which has concentrated benefits and dispersed costs is one which gets heavily lobbied for, and this will no different. Expect lobbying for the debt to become a lot more like it is in the US: real rates of interest, and rules which make it impossible to default on, or not pay back, student loans.

When the sale happens, in other words, the fight isn't over. It's only just begun.

And even if the private lenders who buy the debt don't act on it, there's something else to consider: it removes a key commonality of interest between the Government and graduates.

While the government owns student debt, it is in its financial interest to ensure that graduates do well. If it leaves the younger generation to languish in unemployment, it won't get its investment back. That's no longer true.

But for all the risk to students, the bigger reason why the sale of student debt is stupid is because it's bad for the country.

It is, in essence, borrowing. The government is giving up income in the future to gain a lump sum now. And that's fine! It's the sort of thing which it should have done three years ago, not two years in the future, but whatever: it's nice to see that they're finally, grudgingly, painfully slowly accepting that the foundations of their entire economic structure are riddled with holes.

Except they're not. Because in a desperate effort to make it look like they aren't completely chucking out every belief they pretended to have, the Government isn't actually going to borrow the money. Which means that rather than taking advantage of what were, until last month, some the lowest bond yields Britain had ever seen, and what remains an astonishingly low cost of borrowing… we aren't. Instead, our government is twisting itself in contortions, discussing student loan debt as though it's a pile of newspapers sat at the back of the treasury, which they mustn't be "compulsive hoarders" of, in order to sell at a discount an asset which is significantly more valuable in public hands than private. It's politically driven economic illiteracy.

And so to encourage the purchase, to eke some cash out of this shoddy deal, the government is likely to implement a "synthetic hedge". Basically, it lets them sell the student loan debt as though they'd implemented the changes to repayment rules, without actually doing it. They promise to pay the purchaser a sum equivalent to what they'd be getting if the rules had been changed, and then kick the question of how to actually pay that sum to a future government. It's cowardice dressed up as a business plan, and it's coming here in 2015.

Photomontage: Getty Images/Alex Hern

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear