Still paying off a student loan? The credit snoops want your number

I reached something of a milestone in every graduate's life last week - I paid the final instalment on my student loan. It was cause for a small celebration, but I am one of the lucky ones - I took the full quota of loans available, but the average amount borrowed in my first year was just over £1,000; last year's freshers borrowed a typical £3,260 to fund one year's study.

Student loans are not viewed as a commercial debt, in the way that a credit card advance or a personal loan would be. Eligibility is not determined by a credit rating; repayment rates are income-contingent, with the interest rate linked to inflation. A student loan cannot be discharged through bankruptcy, and information about those who default will not show up on their credit file.

It is this last fact that has caused much controversy lately. Last year a number of commercial lenders agreed to sign up to a new data-sharing initiative via credit reference agencies Equifax, Experian and Callcredit. As well as sharing 'negative data', including missed loan repayments, they agreed to share 'positive' data about customers for the first time, such as how much is spent on a card and how much is paid back each month. However, these lenders argue that missing data about student loans (as well as about council tax) deny them access to the full picture that would allow them to make more responsible lending decisions.

'With £3,000 tuition fees being introduced this year, and the ability for students to pay them with a student loan, we can expect a significant hike in the amount of money the Student Loan Company (SLC) lends,' said Paul Gratton, chief executive of Egg. 'By sharing their information, the lending industry will be better placed to help young people to manage their borrowings and avoid financial difficulty.'

The SLC also wants this data to be made public. At the end of last year its chief executive, Ralph Seymour-Jackson, wrote to the Department for Education and Skills to ask it to change the rules and allow lenders access to this information. The department has noted the request, but has no plans to change the situation.

'We are now talking about much more debt than the few hundred people who borrowed when we were first set up,' said an SLC spokesman. 'We do want information to be made available, but not about everyone - only about certain individuals who have defaulted by a significant amount.' The SLC reckons it is on target in terms of the numbers of borrowers paying back the due amount. Yet figures show that the amount in arrears has risen steadily, from just under 10 per cent of the amount owed in 2002-03 to nearly 14 per cent by the end of the last academic year.

However, not everyone agrees that this information should be shared. 'Student loans are promoted as being unlike commercial debt,' says Kat Fletcher, national president of the National Union of Students. 'To make repayment data available would fundamentally weaken that position at a time when the government is taking pains to stress how different they are.'

Fletcher also argues that mistakes and delays in processing and administration mean that borrowers are often falling into arrears through no fault of their own: 'It would be extremely unfair if such mistakes were to damage a borrower's credit rating. And if the perception among prospective students is that having a student loan debt will reduce their chances of obtaining a mortgage or other credit once they graduate, it will only act as a further discincentive to enter higher education at a time when the inevitable increase in their debt is already preying on their minds.'

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