Students fight EU loan plan

Guarantee scheme will aid banks, not us, insists European Student Union. Matthew Reisz reports

November 1, 2012

The European Student Union (ESU) has come out strongly against the European Commission’s proposed loan guarantee facility for mobile master’s students, describing it as likely to cause “more damage to young people instead of increas(ing) their chances for better lives”.

The loan facility, put forward in November 2011 as part of the Erasmus for All programme, is currently being debated by the European Council and the European Parliament. Karina Ufert, chair of the ESU, has urged both “to listen to us, the students” as they do so.

The ESU sets out its objections in what it calls a “non-paper” and argues that “providing student support is primarily a responsibility of the member states”. Since a ministerial communique in 2005, it says, governments have reiterated their commitment to the “full portability” of domestic grants and loans rather than a new scheme on the European level.

Such a scheme, the student union argues, would fail “to ensure a full income-contingency model”.

The ESU adds that the “proposal to facilitate the loans through predominantly private financial intermediaries lacks any risk analysis about the impact it will have on young people’s debt”, noting that “Americans now owe more on student loans than on credit cards”.

Furthermore, it suggests that at EUR10,000 (£8,000) a year, “the maximum amount set for the loans per individual does not reflect the real needs of students to pay tuition fees and/or cover living costs in most of the attractive study destinations”. This would make such loans “accessible only for students from more privileged backgrounds” and would have a negative impact on widening access and social mobility.

It also says that indebted students would find it hard to proceed to PhD study and would be strongly incentivised to move to high-salary economies, leading to a brain drain from poorer regions.

Even more fundamental, the ESU notes, is the fact that, rather than serving students, the loan facility “acts as a guarantee to the banks, so they would not lose their profits”.

The body’s member unions “have adopted a clear stand against the loan scheme as it is currently being discussed. ESU is a democratic structure, through its network of national unions, representing over 11 million students.”

The union argues that as students are “the potential beneficiaries”, they must be consulted.

Ms Ufert urged the European Council and the European Parliament “to bin the plan and urge the Commission to come up with constructive alternatives to increase education mobility”.

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