UK considers offering student loan access in foreign trade deals

The UK government is exploring the idea of offering access to public student loans for overseas students studying at British universities, as part of potential post-Brexit trade deals with foreign governments.

Discussions are thought to have taken place on the idea – involving the creation of government-provided “commercial-style loans” for overseas students – between the Department for Education, Universities UK and the Student Loans Company.

Sources with knowledge of the discussions said that they arose out of the likelihood that, post-Brexit, European Union students will lose access to SLC funding and be charged the same full fees as non-EU students are at present, leading to a decline in numbers.

Making loan access part of potential free trade agreements with foreign governments – including the EU if the UK reaches a trade deal with it – is seen as one way to address this.

One source with knowledge of the discussions said that a solution was needed to avert a “chasm” opening up in enrolment for UK universities, given their significant numbers of EU students.

There were 127,440 EU students at UK higher education institutions in 2015-16, comprising about 6 per cent of total student numbers, according to the Higher Education Statistics Agency.

The source suggested that the discussions had focused on the idea of creating new, government-provided loans that would be “net positive” for the UK Treasury, distinct from loans for domestic students.

And the discussions have covered the fact that any FTA involving student loans would need to include an agreement between the UK and a foreign government to collaborate on collecting repayments in the students’ country of origin, once they return home post-graduation.

Simon Marginson, professor of international higher education at the UCL Institute of Education, said: “In principle, this sounds like a smart idea [that] should create a marketing advantage for the UK as other English-speaking countries charge full fees to international students without loan support.”

But he pointed out that collecting loan repayments from mobile graduates “is more difficult than collection in relation to domestic students who become domestic taxpayers”.

Nick Hillman, director of the Higher Education Policy Institute, said that the idea sounded “unwise”, “at least unless the partner country could offer some sort of certainty over helping recover the loans after graduation as well as reciprocity for Brits travelling to their countries to study”.

He added: “My preference would be to use any loan expenditure saved by not being in the EU on a proper outward mobility strategy for UK citizens to study abroad. That would show other countries we are serious about engaging with them but in a different way.”

Analysis by London Economics has suggested that although raising EU student fees to the level currently charged to non-EU students and removing access to fee loans could reduce new enrolments from EU nations by 30,000, or 57 per cent, the net effect of depreciation in sterling and higher fees for EU students could be a Brexit dividend of £187 million in increased income for UK universities.

john.morgan@timeshighereducation.com