UK ‘should learn from’ NZ’s example of arresting loan defaulters

Defaulting on a student loan when living abroad “could be regarded as just as bad” as tax evasion and benefit fraud, and the UK should learn from New Zealand’s tough system for overseas defaulters, according to the director of the Higher Education Policy Institute.

Nick Hillman spoke as Hepi published a new report on lessons for the UK from New Zealand higher education – where overseas loan defaulters can be arrested on return to the country – on 28 July.

The report, written by Sam Cannicott, a former education adviser to the Liberal Democrats and Regent’s University London policy officer, also holds up New Zealand’s coherent education exports strategy and short-lived experiment with the abolition of student number controls as potential lessons for the UK.

On number controls, Mr Cannicott, now a senior adviser at Statistics New Zealand, writes: “Between 1999 and 2002, New Zealand experimented with a demand-led tertiary education sector, while also encouraging private providers to enter the system. Costs soared and number controls were reintroduced.”

But despite the reintroduction of number controls, concerns over quality remained, he says.

“After a series of scandals emerged in the media, such as stories about courses teaching homeopathy for pets and other qualifications of dubious economic value, an opinion poll commissioned by the NZQA [New Zealand Quality Authority] suggested that only 36 per cent of New Zealanders had confidence in the country’s tertiary education system,” adds the report.

“Concerns, in both the UK and New Zealand, that the behaviour of poor quality providers tarnishes the whole sector are therefore well founded.”

New Zealand has increased international student numbers in recent years and has “a goal to double the value of international education to the country by 2025”, says the report, titled Higher Education in New Zealand: What Might the UK Learn?

The report notes that New Zealand’s education exports strategy takes a joined-up approach across schools and universities. The UK’s approach to international students, in which the Home Office and other departments have often been in conflict, “contrasts with New Zealand’s ambitious, detailed and comprehensive strategy which enjoys cross-government support”, it says.

On student loans, Mr Cannicott notes that repayment obligations for New Zealand borrowers who move overseas are not related to graduates’ income, but instead based on the outstanding balance.

“This removes the need for the government to collect information about the borrower’s income and makes the former student’s obligations clear,” writes Mr Cannicott.

He adds that 2014 legislation made it a criminal offence for overseas borrowers in default to refuse to repay, and allows arrest warrants to be issued for persistent defaulters.

Mr Cannicott said that “Brexit presents an opportunity for the UK to learn from New Zealand because there is less need to ensure the repayment terms of EU students are the same as those for domestic students”.

Mr Hillman said: “Tax evasion and benefit fraud rip taxpayers off. Defaulting on your student loan could be regarded as just as bad.

“Yet it is fairly common among both Brits and EU citizens who study in the UK before working abroad. Whitehall has never gripped this problem fully but New Zealand’s experience suggests strong enforcement action works.

“If the government is serious about wanting to sell off the student loan book to the private sector, tougher penalties for non-repayment would also increase its value…Ministers, MPs and peers should consider amending the Higher Education and Research Bill currently before Parliament to ensure higher repayment rates.”

john.morgan@tesglobal.com