Loans could be offered to EU students as part of the Brexit deal in an attempt to encourage them to continue studying at British universities.
Discussions between the Department for Education, Universities UK and the Student Loans Company (SLC) are understood to have taken place on the creation of government-provided “commercial-style loans” for overseas students.
Once Britain leaves the EU, students from the bloc will lose access to SLC funding and be charged the same full fees as non-EU students are at present, which may lead to a decline in numbers.
Making loans part of potential free trade agreements with foreign governments is seen as one way to address this, according to Times Higher Education.
One source said a solution such as this was needed to avert a “chasm” opening up in enrolment for UK universities, given their significant numbers of EU students. There were 127,440 EU students at British higher education institutions in 2015-16, comprising about 6 per cent of total student numbers. Any deal involving loans would need to include an agreement between the UK and a foreign government to collaborate on collecting repayments in the students’ country of origin once they return home after graduation.
Simon Marginson, professor of international higher education at the UCL Institute of Education, said: “In principle, this sounds like a smart idea [that] should create a marketing advantage for the UK as other English-speaking countries charge full fees to international students without loan support.”
He pointed out, however, that collecting loan repayments from mobile graduates “is more difficult than collection in relation to domestic students who become domestic taxpayers”.
Critics say it could prove simply too difficult for SLC to collect the money. One in ten are already in arrears.
Nick Hillman, director of the Higher Education Policy Institute, said that the idea sounded “unwise”, at least unless the partner country could offer some sort of certainty over helping to recover the loans, “as well as reciprocity for Brits travelling to their countries to study”. The proposal comes amid concerns that the present system is unaffordable. The prospect of billions of pounds of outstanding student loans ending up on the government’s balance sheet and ultimately being met by taxpayers is being investigated by MPs.
The cross-party Commons treasury committee will examine the implications of the system amid warnings that as many as 83 per cent of university leavers will never pay off their student loans, leaving taxpayers to foot the bill.
Nicky Morgan, chairwoman of the committee, said the sums being discussed were vast. Student loan debt is projected to be about £160 billion within six years and the government has announced that it will review the whole student finance system.
MPs are concerned that in the rush to woo younger voters by promising students more generous loan terms, future governments will be faced with unsustainable levels of unpaid debts. The repayment threshold is to be raised so graduates can earn up to £25,000 before making any payments, rather than £21,000. That change alone will cost the government £2.3 billion a year.
