Loans firm tightens debt recovery

By Hannah Richardson
BBC News education reporter

New students can expect to graduate owing £23,000

The firm responsible for managing the student finance system is tightening its procedures for recovering debt as it writes off nearly £29m.

The Student Loans Company (SLC) has adopted new ways of tracking debtors' work and income status and chasing European students returning home.

The move comes as the public debt from student loans reached nearly £26bn.

This is nearly double the debt it had at the end of 2005, six months before variable tuition fees were brought in.

The introduction of the student finance package in 2006, under which students borrow indirectly from the government through the SLC to cover their tuition fees and maintenance costs, meant public debt increased significantly.

Students are now expected to graduate with total debts of about £23,000, a recent survey suggests.

'Write offs'

A spokeswoman for the SLC said it regularly reviewed its processes and strengthened them where necessary.

"There has been a tightening of processes in terms of recovery. As a business we are constantly reviewing and improving what we do."

She added: "The SLC has established new robust processes. Those staying in the UK are expected to obtain a National Insurance Number and make repayments through the UK tax system.

"But those borrowers who move will have repayments automatically scheduled if they fail to respond to SLC by next April.

"This will enable default schedules to be set up, borrowers traced and, where appropriate, legal action will be taken."

Tax records

The steps are being taken as the SLC writes off or cancels £29m worth of public debt.

This represents 2,500 student loans, 1,700 of which were written off or cancelled as a result of death.

However, the SLC is keen to point out that not all of these deaths occurred within the past year and that a backlog from previous years was cleared.

Loans are written off when recovery is deemed unlikely by the loan administrator or not possible by legal judgement. They are cancelled when the debtor is no longer duty-bound to repay.

Students do not have to repay their loans until they earn at least £15,000 a year.

The firm's own figures showed that 227,000 debtors still had their employment status to be determined.

The SLC says this group includes people who have changed jobs and are paying back their loans but waiting for their HMRC records to be updated, people who are unemployed but not on benefits and people who have gone back to study full time or part time.