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Student Loans: 'we will trace and prosecute borrowers who don't pay'

“As more loans are issued to new students each year, it is vital that the repayment process is robust, convenient for borrowers and working efficiently to ensure the sustainability of the student finance system and value for money for the taxpayer,”

Reviews of the student loan repayments system by the National Audit Office, the public accounts committee and the business, innovation and skills committee during 2013 and 2014 recommended that the government take more action to improve the repayment process.

“As more loans are issued to new students each year, it is vital that the repayment process is robust, convenient for borrowers and working efficiently to ensure the sustainability of the student finance system and value for money for the taxpayer,” said Jo Johnson in a written statement to the House of Commons.

“We will take stronger action to trace borrowers including those overseas, act to recover loan repayments where it is clear borrowers are seeking to avoid repayment, consider the use of sanctions against borrowers who breach loan repayment terms and, if necessary, prosecute,” he said.

The minister said the approach was fair for borrowers, good for “the effective management of public money” and would help to ensure the student finance system “remains on a sustainable footing”.

Johnson’s comments came as the government published a new strategy for the collection of student loan repayments which set out how the Department for Business, Innovation and Skills, the Student Loans Company, HMRC and the devolved administrations of Wales, Scotland and Northern Ireland could work together to make the repayment system more effective.

The strategy sets out how the government will improve its ability to trace borrowers and pursue and recover outstanding student loan debt. The vast majority of borrowers repay their loans through the UK tax system, using either or both PAYE or self-assessment processes. But for borrowers who move overseas, the Student Loans Company has to collect repayments directly from the borrower.

The document outlines how the UK will work with the government of Australia – the most popular foreign destination for British university leavers – to share data on expatriate graduates in order to collect debt.

Previously the government and the SLC have run data-sharing pilot projects with the Netherlands and Sweden, with each country sharing details of borrowers believed to be in each other’s countries.

About 123,000 of the SLC’s debtors live overseas, out of 5.5 million people who have loans. Those overseas owe a total of £1.5bn, of which just £368m in debt belongs to “unverified” British borrowers for whom the SLC does not have contact details. More than 72% of UK borrowers overseas had up-to-date contact details on file last year.

But the SLC says: “Not all unverified borrowers will owe money. While some do, others may not be working, may be in receipt of benefits, not earning enough to repay or may be between jobs.”

  • Date published: 15th February 2016