Plan to seek EU-wide initiative on unpaid student debt

Danish Tax Minister Karsten Lauritzen and Minister for Higher Education and Science Søren Pind have published a seven-point action plan to address the issue of foreign citizens who leave the country before paying off their student loan debt.

It includes a bid to persuade the European Commission to agree to a European Union-wide initiative facilitating student debt recovery across member states.

“Denmark is not to be a ‘gift heaven’ where we let foreign citizens leave Denmark without repaying their debts,” Lauritzen said.

There has been an increase in the debt held by citizens from European Union/European Economic Area (EU/EEA) countries, from approximately DKK106 million (US$17 million) in 2015 to DKK155 million (US$25 million) in 2017, an increase of 46%. The number of European citizens owing this debt has over the same time increased from 900 to 1,100 people, with one third of them having left Denmark.

“It could be tempting to press the emergency brake on foreign students’ access to Danish SU [student financial support] where Denmark does not have a bilateral agreement with the countries from which the foreign students are coming, to recover outstanding debt,” ministers Lauritzen and Pind wrote in the action plan. “But this would be against the present EU legislation on the discrimination against foreign students because of their citizenship.”

Plan to recover outstanding debt

The plan to recover the outstanding debt will have a national track and an international track. The four national initiatives are:
  • • Establishment of a new unit within the national debt agency to work specifically with outstanding SU debt;
  • • Cooperation with debt-collection agencies abroad;
  • • Debt enforcement through court lawsuits; and
  • • Total recovery of outstanding student loans if an SU recipient moves abroad without leaving a forwarding address.
The international track has three components. It will include a Nordic collaboration scheme with Iceland, Sweden and Norway; and bilateral agreements with Germany, the United Kingdom and Poland in the first place and later with other countries.

Third, Denmark has started negotiations with the European Commission to develop a new EU instrument that makes it possible for all member states to support initiatives to recover SU debts in the same way as outstanding taxes and fees are recovered when people move from one EU country to live in another EU country.

To secure approval for this initiative, Denmark is now working with Germany, the Netherlands and Sweden to garner support, the two ministers said.

“It is only right and reasonable that foreigners who have received a free education in Denmark with SU support shall not be in the position that they can leave their debt to Denmark on the border,” Lauritzen and Pind wrote.

Both ministers have been under pressure from MPs to tackle the issue in recent months.

The EU last month rebuffed the government’s request for help to claim back unpaid student debt owed by citizens in EU states who studied in Denmark, which is why it is now seeking a pan-EU approach.

In January, five members of parliament from the Danish People’s Party delivered a detailed proposal to parliament to direct the government to stop paying out SU support for foreign citizens “until a system for recovering the outstanding debts in other EU/EEA countries either can be established through an arrangement with the EU or through bilateral agreements between Denmark and other countries”.

The five MPs reported that 441 EU/EEA citizens were receiving SU support in 2012, but this rose to 9,664 in 2017. In the middle of 2016 the total outstanding debt for 1,700 previous students was on average DKK72,585, or DKK123.4 million in total.

They also argued that the potential for a steep increase in outstanding debts over the next few years was great, since the migrant student, in principle on a par with Danish students, has the right to take up Danish SU worth DKK279,960 for five years of full-time studies, in addition to the grant part of the SU.

On 30 January this year, Jacob Mark, member of parliament for the Socialist People’s Party, asked Minister Pind to hand over to parliament the letter they had received from Tiina Astola, director-general for justice and consumers at the European Commission, on the recovery of outstanding SU debt from EU citizens who had left Denmark.

In the letter dated 13 December 2017, Astola told Lauritzen and Pind that no obligation existed at the EU level for member states to assist one another in collecting debts on such loans as the SU.

However, while Astola noted that many European students who move to other member states do not repay their debts, she said for the future sustainability of the current system they believe that a balance should be established at EU level between access to student grants and loans on the one hand and effective student debt recovery between member states on the other.