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20 June 2016

How are graduates who move abroad getting away with not paying off their student loans?

As the student loan repayment threshold falls, we speak to some of the estimated 14,000 students living abroad and defaulting on student loans.

By Charlotte Ryan

As the government throws out a petition by UK students opposing a freeze on the student loan repayment threshold, some UK graduates are choosing to opt out of the repayment system entirely by moving abroad. The National Audit Office found in November 2013 that around 14,000 former students with debts of £100m were living overseas and behind on payment.  

In February this year, universities minister Jo Johnson vowed to take more action to chase up these non-payments, saying: “We will take stronger action to trace borrowers including those overseas, act to recover loan repayments where it is clear borrowers are seeking to avoid repayment, consider the use of sanctions against borrowers who breach loan repayment terms and, if necessary, prosecute.”

The Department for Business, Innovation and Skills confirmed that it has already prosecuted some UK students for failing to make repayments, although it said this was a last resort

But for the British students living overseas and ignoring repayment letters, the threat of prison seems a distant reality. Ella Hargreaves, 24, says: “It’s something I would have probably taken very seriously if it was in place whilst I was moving to Vietnam, but now I have lived here for so many years I find it hard to worry about.”

She moved years ago, and says: “I guess I didn’t really decide to not make repayments. It’s something that was automatically happening when I was working and living in England, but as soon as I moved away I wasn’t a tax payer any more.”

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She adds: “I’ll be honest, I didn’t try and figure out how to pay or how much I should pay whilst living and working overseas. My brother has lived here for six years and hasn’t paid anything back, so I knew they wouldn’t go out of their way to find me.”

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Owen Paterson, 27, has a similar story. He moved to Europe immediately after graduating, then to Latin America and has never made a loan payment. He is now studying a masters at a UK university through distance learning. He says: “Funnily enough, I haven’t received any communication from Student Loans, but I have entered the system and seen that the interest is taking effect big time.

One borrower told the New Statesman that she tried to make payments from abroad but almost gave up after suffering logistical problems. Lara Dickinson, 28, said: “I’ve tried to keep them updated but it is ridiculous as they don’t accept faxes or emails and everything has to be done by post. I also sent some documents recorded delivery last year which got ‘lost’. I had to send them again – and they refused to help with postal costs.”

Rosie Howarth, 26, says the same problems caused her to stop trying. She says: They don’t use email so it was pretty impossible to organise anything when i was away. Since her return to the UK, she has been asked for £2,500 in arrears which she says she can’t pay.

Until a couple of years ago, graduates who moved abroad were exempt from making payments on their student loans, but with more moving overseas this policy has changed. The Student Loans Company has now compiled a list of equivalent minimum salaries for every country in the world, which several of the people I spoke to said was calculated too harshly.

Lara says: “Here in Colombia, the earning threshold is a lot lower for repayments than at home, but then they would charge £150 in repayments each month  which is inaccessible and a ridiculous sum for many earners here.”

Zoe Davis, 29, who graduated in 2014 and lives in Germany, says she has never heard anything from student loans and with a young child to support, simply can’t afford to pay: “I’m a post-doctoral research scientist and I decided not to pay because I can’t afford it. With childcare costs and everything else I’m barely scraping by as it is.”

She will have to begin payments on her loans soon, when she begins a secondment to a British university. She says this will leave her struggling to afford childcare.

As students back home say they were conned by a government promise to up the repayment threshold in line with inflation, for those who have already left there isn’t much motivation to pay into what many believe is a faulty system.

Owen says: Moving away was a case of obligation if I wanted to go from university straight into something related to my studies. Back in the UK there would have been very limited opportunities, and I didn’t want to go and work in a restaurant or something like that, like a lot of my graduate friends ended up doing.

Like many of the graduates, Ella now feels more at home in her adopted country: “I’m documented fully here. I pay tax to the Vietnam government, I pay fees, I pay for a lot of things. So this is my real life now, student debt feels a million miles away.”

Owen agrees, saying: “If I move back, I guess they would locate me and I would end up having to start making payment. However, I have no plans to move back in the near future.”

This may be the biggest problem for the education minister and his repayment strategy. For those graduates who have renounced Britain for good, it could prove difficult to provide the incentive to give back the estimated £367.5m missing from British coffers.

And with the UK repayment threshold going down in real terms and uncertainty over Britain’s future in the EU, we might see more graduates opting out of the system to build a life overseas.

*names have been changed