Interest in borrowings is not mere linguistics

With individuals and institutions alike calculating potential costs of Brexit, recouping loans from EU students can’t be ignored

August 20, 2015

When the dictionary compilers meet to decide which new words to anoint at their annual shindig (and I like to imagine there is one), “Brexit” will surely be on the list for 2015.

With the referendum on Britain’s membership of the European Union looming, anxiety among those in favour of staying seems to be rising.

Take, for example, The Guardian’s report this week on the “Rush for dual-nationality passports as EU migrants fear Brexit”: a growing number of the 2.4 million EU citizens living in the country are seeking to become naturalised Britons as a precautionary measure ahead of the vote, it said.

Particularly striking was how many of the professional Europeans quoted in the article had originally come to the UK as students and then stayed on to work and start families.

This was the vision of the European project – genuine integration – and the newspaper notes that an estimated 2 million Britons are living elsewhere on the Continent.

But it’s worth returning to the part that university study plays in all this, in light of figures showing a 14 per cent year-on-year increase in EU student recruitment by English universities.

This rise was predicted last autumn in a report by the Higher Education Policy Institute, which pointed out that the removal of student number controls would encourage universities to expand their EU intake (previously, EU students counted towards the limits on domestic enrolment).

The surge is partly about income, partly about maintaining entry standards, and partly a response to the demographic situation at home, which will mean fewer 18-year-old Britons in coming years.

But it is a development that will also sound an alarm among government accountants, because the truth is that those settlers quoted by The Guardian who came to study and stayed are a minority, and the evidence shows that it is much harder to recoup loans from EU students who go home.

Nick Hillman, Hepi’s director, suggests that a possible solution lies in New Zealand, which faces a similar challenge in recouping loans from its own graduates, many of whom travel abroad to work.

Those who leave the country are dealt with robustly – required to pay off a set amount of their debt each year, hit with a real rate of interest on their loans, and even threatened with having their right to travel revoked if they do not play ball, Hillman notes.

Whatever mechanisms might be applied in the UK, it doesn’t seem likely in the current environment – whether Britain does indeed exit the EU or whether it remains on renegotiated terms – that a Conservative government will stomach a significant rise in its own financial liability to accommodate growth in EU student numbers.

For most in higher education, Britain’s continued membership in Europe is a must, and in purely financial terms EU students are becoming an increasingly important part of the funding mix. But it’s also important that we avoid a two-tier system in which some students repay and others do not, simply because we lack the ability to follow them across the Channel.

That wouldn’t be fair, and with EU student numbers rising, it would put the sustainability of our creaking funding model under ever more strain – even without the dreaded Brexit.

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