Education & Family

Crackdown on student loan repayment avoiders

student Image copyright Ibrakovic
Image caption The government said the vast majority of borrowers repaid their loans

Graduates in England and Wales who fail to repay their student loan in time could be prosecuted, ministers warn.

The government says it will take stronger measures to pursue people - including those living overseas - who are believed to be avoiding repayment.

Universities Minister Jo Johnson said: "As more loans are issued to new students each year, it is vital that the repayment process is robust."

The majority of borrowers met their repayment obligations, he acknowledged.

The crackdown comes after the National Audit Office, the Public Accounts Committee and the Business, Innovation and Skills Committee called for more action to improve the repayment process.

In a written statement to the Commons, Mr Johnson said: "We will do more to support borrowers who seek to meet their loan repayment obligations and, in the interests of fairness to both the taxpayer and to borrowers that meet their obligations, we will be tougher on those who do not.

"We will take stronger action to trace borrowers including those overseas, act to recover loan repayments where it is clear that 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.

"We will keep the strategy under review to ensure that the repayment system continues to meet these objectives, and we will report annually on progress."

Image copyright Thinkstock
Image caption Mr Johnson said a new approach was fair for borrowers and taxpayers

Loans

Universities in England and Wales can charge students up to £9,000 a year for tuition, and undergraduates can take out a loan from the Student Loans Company (SLC) to cover these fees.

The SLC tracks earnings and alerts employers once graduates are eligible to start repaying.

Employers then deduct the correct amount from salaries and pay the loan on behalf of employees. The self-employed though are responsible for paying the correct amount.

Students who took loans out after 2012 start repaying their loan when they earn £21,000 a year or more.

This sum was to increase in line with average earnings, but now the government has frozen the point at which graduates start repaying at £21,000.

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