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UK to enforce loan repayments from EU students

by Luke Lythgoe | 15.02.2016

An annual Eurosceptic gripe, backed up by Student Loan Company (SLC) statistics, is of EU students obtaining thousands of pounds of loans funded by the UK taxpayer, then returning home and failing to repay.

A new government strategy announced by universities minister Jo Johnson on 11 Feb. aims to close the loophole.

EU students in the UK have been eligible for the same study loans as British students since 2006/7, based on the EU’s non-discrimination rules. (Article 18).

Repayments are dependent on the “voluntary compliance” of former students living abroad, but by 2013/14, EU students were cumulatively £16.2 million in arrears with loan repayments (Table 1).

Newspapers, including The Telegraph and The Daily Mail, tend to inflate this figure by quoting the total debt on accounts which have fallen into arrears – including money for which former students already in arrears have yet to be asked. Nevertheless, the smaller figure has more than doubled in two years, creating a glaring hole in government finances.

The changes outlined in the strategy paper are based on a UK pilot project (point 41) involving the Netherlands and Sweden, with each partner helping the other to locate resident borrowers.

One partner (the paper doesn’t specify which) helped the SLC to locate half of the non-responding borrowers, while the other partner located 90%. Only 20% of these either fully repaid or started regular payments after a single letter, but the government proposes following up on each case.

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The problem of EU students who cannot be traced after they graduate is likely to worsen after the recent removal of caps on student numbers. The university admissions body, UCAS, reported an 11% rise in acceptances of EU students in 2015 compared to 2014.

Increasing admissions from the EU boosts university tuition fee income, while preserving entry standards as the number of UK-born 18 year olds is dropping.

Johnson’s new strategy currently relies on bilateral schemes outside the EU system. But he is pushing for “a wider European approach to data sharing” with other countries’ tax authorities.

The minister’s current optimism may only be based on “positive initial results”, but if successful, the new rules could undermine a once unassailable Eurosceptic argument.

Edited by Yojana Sharma