Private eyes to track down EU students who owe £50m in loans

British taxpayers will have to pay for graduates who have left the country without repaying debts

Private investigators have been called in to track down hundreds of overseas graduates from UK universities who have gone missing owing millions of pounds in loans bankrolled by the British taxpayer.

The Student Loans Company (SLC) has been forced to take dramatic measures to claw back its money after the amount owed by European Union graduates who are not repaying their tuition-fee loans rose to more than £50m in five years.

Hundreds of EU nationals who have returned home and reached the income threshold at which they should be paying back their loans have slipped into arrears. Many have failed to provide any salary details, so that officials cannot even start the process of reclaiming their debts.

But many more, who are responsible for loans totalling £41m, have not revealed crucial information about where they are living, whether they are working, or how much they are earning.

MPs complained yesterday that a failure to maintain tight controls over EU students had allowed them to disappear back home, leaving the British taxpayer to pick up the tab for their education. The Labour MP Frank Field said he would urge the National Audit Office to investigate the system of keeping tabs on EU students. "This situation has turned the loans into a grants system for many EU students," he said.

Andrew Percy, a Tory MP, said: "With British students paying more in tuition than ever before, many people will not understand how it is possible that foreign students from the EU are able to turn up to the UK, run up taxpayer-backed debts and then leave. Many of these students will never contribute a penny in income tax to the UK and will be incredibly expensive to track down."

Officials from the SLC, a public-sector agency, confirmed that they had appointed a tracing agency to locate EU graduates and claw back their debts, amid official warnings that up to one in four will never pay a penny back. The Government-owned organisation has made it clear that, if necessary, it will take graduates to court to ensure they honour the terms to which they signed up.

The SLC was set up in 1989 to provide loans and grants to students at UK universities and colleges. It has paid out more than £117m to EU students in five years after it was obliged to offer them financial support following the introduction of tuition fees in 2006-07. But official figures show that, by last year, repayments from borrowers responsible for almost £52m of the total had dried up – or had never started. (The total amount owed by UK graduates is £28m.)

EU graduates owing £1.6m were officially listed as "known to be overseas – above the earnings threshold for that country and fallen into arrears", while those identified as "known to be overseas – has not provided details of income and is now considered to be in arrears" owed a total of £9.1m. But the total owed by borrowers in the category "not currently repaying – further information required to establish correct repayment status" amounted to £41.3m.

Students from Cyprus borrowed the most from the SLC, but £15m of their £24m debt is not being repaid. Graduates from France, Germany and Poland ran up tuition-fee debts of more than £10m, but the SLC figures reveal that it is owed huge sums by former students from some of the most recession-hit countries in the EU, including Ireland and Greece.

To tighten up controls over repayment rates, the SLC introduced a new system requiring graduates to complete an overseas assessment form as soon as the organisation is informed that the customer is going abroad. If the graduate fails to respond within 14 days, they are issued with a fixed repayment schedule.

If they do not maintain this then they are considered to be in arrears, triggering the "normal collections processes". The SLC has stressed that, by placing customers in arrears, it can "actively pursue customers who have not provided adequate information to allow repayment amounts to be calculated".

An SLC spokesman said borrowers who moved abroad without informing the organisation faced action from "international trace agents", additional financial penalties and legal action.

Rob Wilson MP, a former Tory education spokesman, said: "The SLC has been put in a very difficult position by the nonsense of the UK being forced to allow EU students equal access to financial support." The Tory MP Peter Lilley said: "This is an area where Britain should be seeking the repatriation of powers in a future renegotiation."

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