Education: Student Loans

Lord Flight Excerpts

Monday 3rd June 2013 Lords Chamber

[Baroness Garden of Frognal]

My Lords, it is not the company but the loan book which was launched in March; the sale of mortgage-style loans is currently out for tender and we do not know how it will result. I can assure the noble Lord that we shall be looking very carefully to ensure that any company that purchases these loans provides protection for the borrowers as well as a financial repayment.

[Lord Flight]

My Lords, a paper in the Library produced by the Government forecasts a major increase in defaults on student loans to 40% of the total. The two main causes appear to be non-payment by people from overseas—certainly not just Europe—and, more particularly, students not earning enough to meet the requirement to repay. Will the Government consider two options to address these problems? First, it is quite difficult to set up banking arrangements to repay from overseas. If there were standard arrangements such that someone earning dollars could automatically have a standing order to convert dollars into sterling and repay, it would make the admin easier. Secondly, could more attention be given to vocational training after which people’s pay is often higher and they get jobs more easily?

[Baroness Garden of Frognal]

The answer to my noble friend’s last point is yes. However, his point on vocational training is slightly wide of the Question that we are discussing. Most of the loans from the Student Loans Company go to UK-based students or students from other EU countries. We have set up much more effective systems for ensuring that payments come through from bank systems and other assurances. He is absolutely right that most of the people who do not repay are those who go into very low-paid jobs. However, the percentage of students who do not entirely repay their loans tends to be higher than the percentage of the total value of the loans repaid. The cost to government will still be less than if the same money were given in the form of a grant.