Cost of loans chaos mounts

Vice-chancellors and university officials are warning that institutions stand to lose hundreds of thousands of pounds in administrative costs because of expected student loans "chaos" this term.

They fear institutions may be caught in a Catch 22 if they attempt to force students to pay tuition fees while they are relying on loans to pay fee debts outstanding from last year.

In a letter to all vice-chancellors, higher education minister Baroness Blackstone has urged institutions to be "both sensitive and flexible" in collecting fees "so that students are not discouraged from taking up their places".

But she says that where a student's fees for last year are outstanding "it would not be unreasonable to require such a student to pay tuition fees for both 1998-99 and 1999-2000 before allowing him or her to enrol for 1999 2000".

She adds: "I fully recognise that students, too, must meet their financial obligations under the student support system."

Vice-chancellors have pointed out that many such students will be relying on receiving a loan cheque in order to pay - but the cheque could not be released if they are not enrolled.

They are also concerned that local authorities have been warning of expected hold-ups in processing loans applications.

According to Peter Knight, vice-chancellor of the University of Central England, many institutions are already likely to be incurring significant costs chasing many small debts. As universities have no leverage to enforce debt payment it could encourage students to hold off paying for long periods, he warned.

"It's a stand-off. We can't find a way around it," he said.

The letter suggests universities should not have to wait too long for payment from students who applied for places late because of a "fast-track" system for student support introduced by local authorities.

Rex Knight, academic registrar at Southampton University and chairman of the new Academic Registrars Council, said: "If some students have not paid since last year, it is more difficult to be sensitive, because you are establishing a pattern."

Mike Pearson, chairman of the University Finance Directors Group, said institutions should be prepared to play an increasing role in student support.