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15th February 2016

Government to crack down on loan repayments

New measures will be introduced to target student debtors who have left the UK

The Minister for Universities, Jo Johnson, has announced that the government will be cracking down heavily on student loan repayment evaders.

While more help will be given to those struggling with their loans, stronger measures are being introduced to pursue those who go abroad and fail to meet their repayment deadlines.

Mr. Johnson said in a written statement to the Commons: “As more loans are issued to new students each year, it is vital 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.

“We will 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.

“This approach is fair for borrowers and good for the effective management of public money, providing value for the taxpayer and helping to ensure that the student finance system remains on a sustainable footing.”

Currently, for tuition, universities in England and Wales are allowed to charge up to £9,000 a year. While some students choose to privately fund their studies, the vast majority of students take out a standard tuition loan and varying maintenance loans from the Students Loans Company (SLC).

Those students who took out loans after 2012 start repaying their loan when their post-university salary reaches £21,000. While this level was originally set to increase with average earnings, the government has held the point at which graduates start repaying at £21,000.

As of now, if former students live and work in the UK, money for the student loan is automatically deducted from a debtor’s pay slip. However, when working abroad, payments must be made voluntarily. It is estimated that around £75 million of unpaid loans have accumulated over the last two decades from UK students going abroad.

Government officials, desperate to make savings and to balance their books, are trialling new methods of co-operation with foreign governments, similar to the piloted information sharing project between Sweden and the Netherlands.

According to the Daily Mail, the two countries share the information of over two hundred ‘missing’ debtors believed to be in each other’s countries for more effective loan repayment policing.

To increase the SLC’s ability to track down and discipline non-compliant debtors, a range of new financial penalties for those who breach the terms of their loan repayments have been proposed. One method put forward is the referral of those abusing loan repayments to credit rating agencies. Legal action will also be taken if deemed appropriate.

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