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pounds 142m owed to loans firm may not be repaid; CASE STUDY

Wendy Berliner
Friday 24 November 1995 00:02 GMT
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WENDY BERLINER

About pounds 142m borrowed so far from the Student Loans Company may never be recovered, according to company estimates in a report published yesterday by the National Audit Office.

Most of the money - some pounds 127m - may not be paid back because the graduates never earn enough to reach the threshold to start repayments, or they die before they do.

Some pounds 15m will be owed by graduates who do not make repayments and are never caught. More than 11,000 students owing pounds 1.8m are already in default. The company is planning to increase staffing in its collections department from 83 to 150 within the next five years in order to chase defaulters.

The Student Loans Company has outstanding loans of pounds 1.8bn, loaned since the scheme was first introduced five years ago to top up grants for student living costs. The average student loan in the current academic year is pounds 1,040.

Banks and other financial institutions are to be invited to bid to run a privatised student loan scheme under a government Bill published last week.

Ministers believe the costs of the existing loans scheme are growing too high and that alternatives have to be found. When the Student Loans Company was originally set up the big banks refused to take part, mainly because they would not make any money out of it. They remain sceptical about this latest overture from the Government.

The proportion of students taking out loans has grown rapidly since the Government first froze the value of the student maintenance grant and then began to reduce it.

In the 1994-95 academic year 55 per cent of eligible students took out 517,000 loans, compared with 28 per cent of eligible students taking out 180,000 loans five years earlier.

The NAO decided to examine the company after thousands of students suffered delays in receiving their loans last year.

t The Operations of the Student Loans Company Limited, by the National Audit Office, is available from HMSO; pounds 8.95.

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