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Universities Should Take Control Of Student Debt, Says David Willetts

29/07/2014 16:26 BST | Updated 29/07/2014 16:59 BST
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Graduates could soon be repaying their student loan to their university, if a new policy proposed by the former universities minister goes ahead.

Universities would be in control of their graduates' debts and repayments in the plans laid out by David Willetts.

Speaking to BBC's Newsnight, Willetts suggests if universities were able to buy debt once students have graduated and thus be in control, it would give universities "stronger incentives to focus on graduate jobs".

Graduates would pay their university back, rather than the Treasury. In turn, this would mean universities could keep in direct contact with their alumni, according to Willetts.

"At the moment the Student Loans Company is not allowed to provide any information about graduates to universities so we make it impossible to for them to build the kind of contacts that they have in the US," he said.

"I think that if the student consents that kind of information exchange should happen and if the university wishes they should be able to hold the student debt."

However, this proposed policy has been criticised. Although the university fees have been capped at £9,000, some have voiced concerns if universities were to take control of debt, it could lead to universities pushing for the independence to charge their own fees.

In addition to this control, it is feared universities would be able to decide which students they would accept and which they would reject. This might subsequently lead to increased polarisation between wealthy families and those from more disadvantaged backgrounds and women, who statistically have lower life time earnings. Once again, it could see the top universities prospering while the lesser known, less successful universities fall down the rankings.

As it stands, graduates start repaying their loan once they start earning a salary of £21,000 or above. After 30 years, any outstanding debt is written off. The Times Higher Education reported last year 90.8% of full-time first-degree leavers were in employment and/or further study six months after graduating. In July 2013, the unemployment rate for recent graduates was 9%, according to the ONS.

Willetts and those civil servants who have proposed the idea say it would be for the next government to consider. While it is not an official policy, a spokesman for Business, Innovation and Skills (BIS) stated such ideas play "an important role in informing ministers and shaping policy".