Red tape chokes second loans

The student loans scheme came under fresh fire this week as it was revealed that red tape is choking a new applications system for second-time borrowers.

The Student Loans Company in Glasgow confirmed it was facing a large backlog in reapplications after thousands of special forms posted to students in May went missing.

Ron Harrison, the company's chief executive, said that an emergency phone line had been set up and was receiving up to 3,000 calls a day from anxious students who have mislaid the forms, designed to be used by those who want to borrow from the scheme a second time.

The National Union of Students claimed there was now a six-week backlog in applications, causing severe financial problems for many who were relying on loans to pay the rent.

"Because of the freeze on maintenance grants, many students now need a loan just to be able to live. If they have to wait for the money it can cause them severe difficulties," an NUS spokeswoman said.

But Mr Harrison said the new applications scheme was the result of negotiations between the company, the NUS and institutions. The backlog was caused by students losing the forms.

"We have already paid out 120,000 loans compared to 56,000 at this time last year. The bottom line is that a larger number of people are getting loans quicker," he said.

*Government figures published this week show that half of participating students have yet to make a repayment.

Statistics issued by the Department for Education show that of Pounds 771 million lent so far through the scheme, Pounds 751 million remains outstanding.

Around 111,000 ,or 41 per cent, of the 269,000 graduates due to make repayments have been granted deferment because they earn less than 85 per cent of the national average wage. Another 23,000, or 8.6 per cent, have fallen behind with their repayments, and 18,000 are two months or more in arrears.

The proportion of eligible students taking out loans has risen to 47 per cent, and Mr Harrison predicted that well over half of eligible students would be participating by the end of this academic year.

But Labour joined the NUS in claiming that the figures provided evidence that the scheme was now failing both students and the taxpayer.

Bryan Davies, Labour's further and higher education spokesman, said: "Not only is this scheme flawed and unjust, it is also inefficient and costly to the taxpayer."