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Government promises to pursue British graduates living abroad who default on their student loan payments

Universities Minister David Willetts promised to extract payments through courts in "the EU and elsewhere"

British graduates who end up living overseas are more likely to fail to pay off their debts than overseas students, MPs were told yesterday.

Universities Secretary David Willetts told the Commons select committee covering higher education that he was prepared to tackle those who defaulted on their fee repayments through the courts - either in the UK or abroad - if necessary.

However, he said that UK students living abroad were more likely to default than overseas students, with figures showing that 41 per cent of EU students paid their fees upfront - compared with just nine per cent from the UK. In addition, 20 per cent from the EU paid the fees debt off in full immediately they had graduated, again “far higher” than the figure for UK students.

Mr Willetts acknowledged that it was more difficult to recoup the payment once it had remained unpaid for a year. Figures given to the Committee said that three-quarters of overseas debts had remained unpaid for around four years.

He said the Coalition Government had now taken new powers which would increase interest repayments if a graduate failed to pay and added: “We will pursue them in the courts in the European Union and elsewhere. We have done so and we will do so.”

Mr Willetts also told MPs that the squeeze on living standards had meant repayments had not been as high as originally anticipated. The latest estimates from the Department for Business, Innovation and Skills show 40 per cent unrecovered.

Universities Secretary David Willetts (Teri Pengilley)

He added that the Government had got it wrong in estimating graduates on low earnings would increase their income and go beyond the £21,000 threshold for repayments for periods.

He said: “People on low earnings are more likely to be on low earnings consistently and less likely to have periods of buoyancy into high earnings as was envisaged in the first model [of repayments]".

Meanwhile, student leaders and a university think-tank are warning of substantial cuts to the Government’s Student Opportunity Fund - which aims to encourage disadvantaged young people to apply to university.

Million-plus, the think-tank, and the National Union of Students say they understand that the Treasury and the Cabinet Office are pressing for major cuts to the fund this year.

“Cutting the Student Opportunity Fund is an absolute disgrace and... looks like the Government is backtracking on its commitment to support social mobility in favour of balancing the books on the backs of the poor,” said NUS president Toni Pearce.

The Department for Business, Innovation and Skills declined to comment.