Students oppose EU loan facility

Nieuws | de redactie
25 oktober 2012 | Today the EP discusses the ailing Erasmus programme. The European Students’ Union takes the opportunity to attack the foreseen Erasmus loan facility; “portability of loans and grants should remain the focus.”

While the Erasmus budget for 2012 is running short and expectations are that 2013 is going to be even worse, the European Commission has come up with a ‘EU Erasmus Loan Guarantee Facility’ for master students. The loan scheme is part of the ‘Erasmus for all’-proposal, but has received little attention thus far.

The European Students’ Union (ESU) is highly critical. ESU-chair Karina Ufert explains on the phone from Yerevan why such a European loan scheme is a bad idea.

Loans for the priviledged

“We are against the loan scheme, mainly because of the way it is conceived. We believe that instead of setting up a new scheme on the European level, which fails to ensure a full income-contingency model, governments should revitalise their efforts towards implementing Bologna goals. Besides, this is not the time to be pushing people into debt.”

The ESU-chair points out that the maximum amount set for the loans per individual (€10.000/year)  does not reflect the real needs of students to pay tuition fees and living costs in most of the attractive study destinations. “Therefore the loans would remain accessible only for students from more privileged  backgrounds, who can get support from their families or otherwise finance their stay abroad, rather than widen access for participation for underrepresented groups and promote social mobility”, Ufert says. 

ESU thinks that providing student support is primary a responsibility of the member states. Since the Bergen Ministerial Communiqué (2005), governments have been repeating their commitment to full portability of grants and loans. Therefore, first and foremost, this promise should be put into action. In a number of EU countries students can get support to study abroad on favourable conditions (Denmark, Finland, the Netherlands).

Brain-drain

Karina Ufert: “Another objection we have against the loan facility is the effect it would have on students from the less wealthy member states. If you are a Romanian with a €12.000 loan, you can be pretty sure that you will never be able to repay it from a Romanian salary. So those young people will move to other EU-countries, in effect causing a brain-drain.”

“It has already been noticed that there are significant disparities among regions in terms of higher education attainment with rural, less developed regions  lacking high-skilled individuals. The  Commission’s proposal fails to address this issue and risks to deepen the problem further.”

“Since the financial intermediaries will be providing mortgage-based loans without an unemployment or low-income guarantee, individuals will be incentivised to move to certain countries, mostly  Western   Europe or outside EU.” 

Little leverage towards banks

It’s the banking sector that is supposed to deliver the Erasmus loans, something that doesn’t render Karina Ufert very reassured. “The European Commission will have little leverage towards the banks.”

Ufert: “We believe that the current 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. The consequences of this kind of funding can be best seen in the case of the United States.”

“On the 30th of June 2012, total outstanding loans exceeded 914 billion and Americans now owe more on student debt  than on credit  cards.  With the increase in total loans, the loan delinquency has also  increased  and  more and more young people are struggling to repay their student loans.”   

The ESU today presented a ‘non-paper’ on the issue of Erasmus Loan Guarantee Facility.


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