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What future for an EU-wide student loan facility?

An EU-wide student loan facility is currently a hot topic of discussion in the higher education policy debate. Indeed, it is regarded as one of the possible instruments that could support student mobility and help achieve an ambitious target of 20% learning mobility by 2020. Nearly all EU member states have developed sophisticated systems of higher education support and offer student loans and/or grants. However, the portability of such national funding schemes, particularly loans, is rare. With funding by the European Commission, the London School of Economics (LSE) Enterprise and Public Policy and Management Institute have now prepared a feasibility study on student lending to look into the rationale for and possibilities of introducing an EU student loan facility.

Fundamentally, the study highlights the need for private resources to match public funding in order to expand learning mobility opportunities and achieve specific mobility targets. Prominent in the analysis are, on the one hand, shortcomings of national loan schemes, which are usually designed in accordance with each country’s unique realities and concerns (e.g. “free-riders” or “brain drain”), and on the on the other  hand, the strategic and operational advantages of an EU-wide student loan scheme.. Five models for an EU student loan facility are examined, with the preference given to a hybrid model with income-contingent repayments for low earners. The study looks into the financial and other implementation aspects, as well as evolutionary pathways of the preferred scheme.

Clearly, the conclusions of this study will be discussed amongst stakeholders in many fora in the weeks and months ahead, testing the ‘acceptability’ of the new concept. There are critics. The European Students’ Union (ESU) has already pointed to potential drawbacks of such a scheme, highlighting that it could negatively affect already disadvantaged groups and would in general leave young people in even greater debt. From their point of view, better Erasmus grants and fully portable grants and loans from home countries would be a more attractive alternative pathway for improving learning mobility in Europe.

European Commission LSE Enterprise European Students' Union