TENS of thousands of graduates will go on a credit blacklist if the Government’s Student Loans Company gets the go-ahead for tough measures to tackle bad debt.

Those who fail to honour student loan repayments will be barred from obtaining high street mortgages, personal loans or credit cards until they have made good their debts and restored their creditworthiness.

The Student Loans Company (SLC), which has been lending to students for 15 years, is not allowed to identify graduates to banks and other financial lenders if they default on their loans.

But Ralph Seymour-Jackson, the chief executive, told The Times that he had asked the Department for Education and Skills (DfES) to change the rules so that the SLC can pass on details of bad debtors to credit reference agencies.

He said: “First, this is a debt to the taxpayer and needs to be collected. There is also the issue of responsible lending where banks need to have a full picture of the debts a borrower has in order to make the right lending decisions. We should play our part in this.”

He added: “I suspect in the early days this was viewed as a very different sort of debt. There has been a change in attitude and a recognition that this [data sharing] will improve the way we manage the debts of the Exchequer.”

The move would have serious implications for many graduates who are struggling to meet their payments. More than 59,000 are in arrears, with bad debts standing at £162.5 million. Another 58,000 are behind with their repayments and are in danger of being considered a credit risk if they slip any further into arrears.

However, thousands of foreign students may be able to escape their obligations. Mr Seymour-Jackson admitted that safeguards are still not in place for chasing up bad debts in the other EU countries when the Government’s new tuition fees regime is introduced next year. From September EU students will be entitled to claim loans of £3,000 a year to cover tuition fees at English universities, putting them on an equal footing with British students.

Previously EU students had to pay the existing £1,150 annual fee at the start of each academic year. But they will have to repay the new £9,000 tuition fee debt only when they have graduated and are earning at least £15,000 a year.

Ministers have stated repeatedly that mechanisms will be in place to recover taxpayers’ money from graduates in places such as Poland, Lithuania and Hungary. But Mr Seymour-Jackson said: “The exact form of the debt collection rules has not been settled yet . . . some are saying that it [a tuition-fee loan] will make more EU students apply.”

Almost 12,000 EU students were admitted to English universities this year, an increase of 16.7 per cent. Applications from the new EU states in Eastern Europe, Cyprus and Malta jumped by two-thirds last year and are expected to rise again sharply in 2006.

Mr Seymour-Jackson has sent the proposal for sharing information on defaults to Bill Rammell, the Higher Education Minister. Mr Rammell admitted in a parliamentary answer this summer that the subsidy for EU students is expected to rise to £40 million by 2007. Barry Sheerman, the Labour chairman of the Commons Education Select Committee, has repeatedly questioned the ability of the SLC to recover debts from EU graduates.

The SLC, based in Glasgow, was set up in 1990 to provide low-cost finance to students, initially as a supplement to grants and then in place of them. The form of lending changed in 1998 from mortgage-style payments, repaid by direct debit from graduates’ bank accounts, to income-contingent loans, by which repayments are collected from salaries at source by the Inland Revenue.

The concern about bad debtors in Britain focuses on mortgage-style repayments, which rely on graduates’ informing the SLC when they move home or change bank accounts.

Credit, Collections & Risk, the trade publication, has reported a “seismic shift” in government policy on the sharing of citizen’s personal information with the private sector.

The Department for Work and Pensions and the Office for National Statistics have already announced plans to share more data, including information on state benefits.

THE BUSINESS OF DEBT

• The total value of the Student Loans Company loan portfolio is £15.9 billion
• Last year the Student Loans Company lent £2.78 billion to students in higher education
• It employs 155 debt collectors
• The Student Loans Company currently has 2.67 million customers with loans outstanding
• Borrowers repaid £496.9 million last year, £158.9 million of which was repaid early. This amounts to an average daily repayment of almost £2 million
• More than 83,000 borrowers repaid their loan account in full last year

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