Student loan defaulters should be criminalized, advises former LibDem adviser

Janet Downs's picture

Graduates who fall behind in student loan repayments while living abroad should be arrested at the UK border, suggests the Higher Education Policy Unit (Hepi).  The report recommends taking New Zealand’s ‘more aggressive’ approach designed to reduce the amount of unrecovered student loans.  New Zealand graduates defaulting on student loan repayments while abroad can be arrested on returning home and hauled before a District Court. 

The law was designed to send a ‘clear message’ to graduates rather than ‘enable prosecutions’, the report says.   But the law exists – default on your student loan when abroad and you face being criminalized.

 “If the Government is serious about wanting to sell off the student loan book to the private sector, tougher penalties for non-repayment would also increase its value,’ Nick Hillman, director of Hepi, told the Independent.   It appears, then, the proposal to criminalise student loan defaulters would make it easier for the Government to flog off the student loan book, something consecutive governments have been trying to do unsuccessfully for years.

UK and New Zealand governments are focused on economic growth, Sam Cannicott* writes.  Policy makers are ‘grappling with harnessing the potential’ of higher education.   But ministers are limited in their ability to ‘direct’ universities to fall ‘in line with’ government priorities, he says.  Cannicott favours the New Zealand approach whereby ministers can ‘force a restructure of university boards’ and appoint their members.  Such moves should set alarm bells ringing – universities should remain independent from government interference.

Cannicott also recommends that state primary and secondary schools should be able to recruit overseas pupils.  This idea first erupted in 2013 when The Times received a leaked letter from the Prime Minister’s office discussing the ‘export potential’ of academies and free schools.   Following concerns about overseas pupils taking state school places at a time of shortage, possible problems with Visas, mixed messages over immigration and a Whitehall source describing the idea as ‘toxic’, the idea was dropped.  The policy is now being resurrected.

The report’s comparison of New Zealand and the UK falls short when it discusses the amount of student loan debt in each country.   Cannicott says total UK student loan debt is ‘approximately $156 billion (£70 billion) or 16 per cent of GDP.’   UK Gross Domestic Product (GDP) in 2015 was £1,833,233,000,000 according to the Office for National Statistics.  16% of that huge figures is £293,317,280,000.   That’s substantially more than £70b.

It could be a typo, of course.  But the suggestions to criminalise graduates who default on loan repayments when abroad, to reduce the independence of universities and to allow overseas pupils to take up places in English academies are not typographical errors.  They should be resisted.

*A note on the Hepi report’s author:  When he worked as a LibDem adviser, Sam Cannicott developed ‘alternative proposals’ aimed at 'steering the LibDems away from its opposition to university tuition fees’.  It appears, then, Cannicott is partly responsible for the LibDems’ broken promise on tuition fees.

NOTE: This article doesn't attempt to discuss EU students who currently default on student loans after attending UK universities.  This is a separate issue which demands more space.

 CORRECTION 11 Jan 2019:  The article has been amended to include the first name of the author, Sam Cannicott.  This was missing from the original article.





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