Repaying student loans

Students (picture Kit)

A news report from the BBC today reveals that growing numbers of students from other EU countries are not repaying their loans to the British Student Loans Company. (Read the report here.) What is going on?

The starting point is that, under EU free movement rules, it is not permitted to discriminate against students from other member states. If subsidised loans are available to home students, then they must be available to EU students too. It is a fundamental principle of federalism that nationality should not form the basis of discrimination.

However, it is also a fundamental principle of federalism that decisions should be centralised only if necessary and decentralised if possible, and here the problem arises.

The business model of the Student Loans Company is based on the notion that the loans it makes will be repaid by graduates through the tax system, and the amount repaid depends on the income of the borrower, rather than being repaid on a strictly commercial basis. If someone is not paying tax in the UK, they do not escape the obligation to repay but, as the BBC has reported, the SLC lacks the means to force them to do so. The tax systems in different member states do not talk to each other because taxation is held to be a matter for national sovereignty.

I gave a talk on this very subject in Ventotene last year – you can read it here – in which I suggested that the extension of the EU free movement provisions to university places should be unwound. The availability of free or subsidised university education is in many ways more akin to social welfare than it is to commercial activity, and, while discrimination against foreign people living in one’s own country is not allowed, there is no obligation on a member state to provide social welfare to foreign people in foreign countries. Overseas students who come to the UK in order to study at a British university ought to have their costs paid by their home country, not by the UK. That was the argument I floated, and it caused some controversy.

The current system may be uncomfortable, but the likely alternatives have drawbacks too.

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Another intriguing feature of the story is the job title ascribed to David Lammy, the minister responsible. He is described as “England’s Higher Education Minister”. Well, he is not that. He is minister for higher education in the Department for Innovation, Universities and Skills, whose powers are largely restricted to England, the competence for higher education in Scotland, Wales and Northern Ireland having been devolved.

However, the parliament to which he is accountable is the UK parliament; the government of which he is part is the UK government. England, as such, does not have a government and does not have ministers. That itself is a story in its own right.

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