UK thinktank urges stricter measures on student loan defaulters – including arrest

28 Jul 2016

Defaulting on your student loan should be made a criminal offense, suggested a UK thinktank.

The Higher Education Policy Institute (HEPI) released a paper on Thursday comparing the UK’s higher education system with New Zealand’s, stating that both shared many similarities, and therefore faced similiar challenges.

The paper’s author, former education policy adviser Sam Cannicott, said that New Zealand’s total student loan debt amounts to around NZ$15 billion (£6.8 billion), while the UK’s is about NZ$156 billion (£70 billion).

Of those totals, an estimated NZ$3.1 billion (£1.4 billion) is owed by former New Zealand students now residing overseas, while the UK’s is approximately the same, at £1.5 billion.

My paper for @HEPI_news published today “Higher Education in New Zealand: What might the UK learn?” https://t.co/ugn0phgq6b

— Sam Cannicott (@scannicott) July 28, 2016

Both countries have been trying to figure out how ways to collect the debt owed by former students, but when it comes to those who are either temporarily or permanently living overseas, it’s an even tougher challenge.

In the paper, Cannicott said that the UK should take a page out of New Zealand’s book, as over recent years, the latter has been cracking down on those not paying back their student loans, in addition to implementing more rigid repayment terms.

Some of the measures put in place by New Zealand to reduce student loan debts are:

Making loan repayment terms based on outstanding balance, rather than income
Introducing an online repayment mechanism
Sharing contact information when borrowers apply to renew their passports from overseas
Hiring the services of private debt recovery companies
Making it a criminal offence for overseas borrowers ‘to knowingly fail, or refuse, to make reasonable efforts to pay’

The last measure, introduced in 2014, has been particularly controversial, as borrowers who are in default can be arrested at the airport should they attempt to enter or leave New Zealand.

In January this year, authorities made it clear how serious they were about the new law when a 40-year old who reportedly owed NZ$130,000 in student loans was arrested at Auckland airport, while a woman was also arrested at the same airport several months later for the same offense.

Is not paying your student loan as bad as tax evasion or benefit defraud? If not, why not? Our new report. https://t.co/VJfmkBEzux

— Nick Hillman (@nickhillman) July 28, 2016

According to Cannicott, some 8,600 EU graduates who studied in the UK owe nearly £90 million in unpaid loans, adding that the UK’s recent decision to leave the EU provided an opportunity to reconsider repayment terms, as well as the availability of subsidized loans to EU students.

HEPI’s director, Nick Hillman, commented on the paper, equating student loan defaulters to tax evaders and benefit fraudsters.

“Tax evasion and benefit fraud rip taxpayers off. Defaulting on your student loan could be regarded as just as bad. Yet it is fairly common among both Brits and EU citizens who study in the UK before working abroad. Whitehall has never gripped this problem fully, but New Zealand’s experience suggests strong enforcement action works,” he said.

Hillman also urged parliament to consider amending the Higher Education and Research Bill, which is currently being discussed, to ensure higher repayment rates.

Image via Flickr