Student Finance

Oral Answers to Questions — Innovation, Universities and Skills – in the House of Commons at 10:30 am on 29th January 2009.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 10:30 am, 29th January 2009

How many people defaulted on student loan repayments in each of the last two years.

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

Figures for England show that about 90,000 student loan borrowers defaulted on student loan repayments for a month or longer in each of the last two years. In 1998, we introduced income-contingent repayment loans. It is generally not possible to default on those loans.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Obviously, the shock is the fact that 90,000 people defaulted; I am sure that the Minister is very worried about that, too. What extra support can we provide to assist students during the current economic crisis? The reach of credit crunch does not stop; it affects everyone, and, obviously, students are facing that pressure. What extra help can we give students, so as to ensure that people still feel they can go to university and are not frightened off from doing so? That is key for the future; what can the Minister say to us about that?

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

I am grateful to my hon. Friend for championing this issue; he has done so not only in relation to his constituency of Chorley, but by bringing it constantly to the attention of Ministers. Under the old-style loans introduced by the Conservatives in the 1990s, there can, effectively, be a default after just a month of debt, and, as my hon. Friend will understand, students often move accommodation and move in and out of jobs, so that 90,000 figure makes the problem of serious default—default for longer than six months and up to a year—appear a lot larger than it actually is. In terms of new graduates coming out of university in the autumn, my right hon. Friend the Secretary of State met student recruiters and those responsible for careers in our higher education system just before Christmas, and I will meet them again this week. We are looking at an internship scheme, and at encouraging employers in the private, public and third sectors to over-recruit into it. We have also increased career development loans—

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons

Order. May I say that perhaps the Minister can write to the hon. Gentleman on this issue?

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Photo of Tim Boswell Tim Boswell Conservative, Daventry

While absolutely not wanting to discourage any overseas student from coming to this country, can I have the Minister's assurance that he will pay particular attention to the position of overseas-domiciled students who can now avail themselves of student loans, because if there is any suggestion that this country is a soft touch and that those students can come here and then will not have to repay their loans, that will run the risk of discrediting the whole show?

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

I know the hon. Gentleman has taken up this issue and asked questions about it, and I want to reassure him that European legislation will ensure that we are able to engage closely with the tax agencies in European countries. That will enable us to collect the right details to ensure that students coming here from Europe repay the loans they have taken out to pursue their education in this country.

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Photo of Anne Begg Anne Begg Labour, Aberdeen South

While defaulting on their loan is always difficult for any student, may I advise my right hon. Friend not to go down the same route as in Scotland, where one political party promised that it would write off all student debt? It got elected and discovered that it could not do that, and that there is no such quick fix. [Hon. Members: "Which party?] It was the Scottish National party. Students voted believing it was going to deliver on that promise, but it turned out to be a mirage. Can I get the assurance that this Government will not give such false hope to students?

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

That was a shameless act of politicking because, in the end, it was taxpayers' money that was involved. It was a foolish thing to do, and I can assure my hon. Friend that we will not be doing that on this side of the border.

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Photo of Evan Harris Evan Harris Shadow Science Minister

While I accept that the income-contingent loans are better than what went before, does the Minister accept that the level of graduate debt is much higher now than it was 10 years ago, and will he further accept that it tends to hit women graduates harder because they stay in debt longer for reasons we understand?

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

The hon. Gentleman will be aware that the repayments of the loans kick in once income reaches a sufficient level, that there are repayment holidays for people if they fall on hard times, and that there are exceptions, such as for those with disabilities or mental illness. It is true that this is a loan system, but the terms of those loans are the best available in the country.

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Photo of David Willetts David Willetts Shadow Minister (Education)

The Minister referred to his national internship scheme. Will he confirm that after I spent a Saturday afternoon chasing him round the TV studios, it became clear that there is no Government-funded national internship scheme and that the companies that he has identified as providing internships made it clear that no extra internships were intended on top of the ones already announced? Will he also confirm that the Government made a clear commitment to review the student loan regime, that the review will take place this year and that the review of student finance will look forward to ideas for the future and not simply be historical?

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Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

The first thing to say is that we are doing all we can to work with employers, careers services in universities, the National Union of Students and students themselves to ensure that students have the best choice and the best portfolio of things they can do when they graduate in the autumn. That compares very well with what was effectively the youth training scheme—YTS—when the Conservatives were in power; nothing was offered then. [Interruption.] The internship scheme was begun in a conversation that the Secretary of State had before Christmas with Microsoft, Barclays and others. I have continued those conversations—indeed, I was talking to Barnado's just yesterday. So, there will be an increase in internships later in the year, and that will happen alongside the career development loans and all the other things that will be on offer at the end of the year. As the president of the NUS has said, this is not a time for panic; it is a time for proper information. I would ask the hon. Gentleman to bear that in mind when he is making public statements.

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Photo of Stephen Williams Stephen Williams Shadow Secretary of State (Innovation, Universities and Skills)

Students who graduate in about five months' time will probably face an uncertain future, and many of them will never have experienced a recession before. Even those who get a job will still face a pernicious repayment regime for their student loans—a 9 per cent. flat-rate tax and a relatively unfair rate of interest. The rate of interest is meant to be subsidised by the Government, but it is at 3 per cent., and that is above the bank lending rate and above the probable expected rate of inflation, which is zero. Is it not time that we had more flexible arrangements for setting that rate of interest, to ensure that graduates are not being penalised at this uncertain economic time?

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Bear in mind there is an Earnings threshold of £15,000+
and the deduction is taken before tax, As Mr Lammy states where else could you get a loan with as favourable terms

Submitted by michael dunleavy

Photo of David Lammy David Lammy Minister of State (Department for Innovation, Universities and Skills) (Higher Education & Intellectual Property)

The hon. Gentleman calls for flexibility. Is that the Lib Dem approach to fees—saying one thing at the election and something else afterwards? Could he cite one bank in the country where someone could get a loan at a rate as low as the current retail prices index? He could not, but that, in effect, is what is available to students.

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