The European Commission is looking at options for setting up an EU loan facility to support student mobility. In October it asked for a feasibility study to be completed by the end of 2010 that will look into the benefits of such a facility and propose three models for implementing it.

Student mobility is becoming increasingly expensive as more universities introduce tuition fees in an effort to supplement public money and diversify funding sources. A Eurobarometer survey in March found 61% of students citing lack of funds as an obstacle or disincentive to study abroad.

At the same time, national governments are committing themselves to a massive increase in mobility. Collectively they adopted a target this year of seeing at least 20% of the student population internationally-mobile by 2020. This would mean 2-3 million students, whereas the EU’s Erasmus scheme currently reaches only around 180,000 students each year.

National and regional student loan schemes already exist, but access is not always easy and many of the loans are not portable, requiring students to spend the money at home. A European facility would be designed to be portable and, the Commission hopes, reach those students for whom money is an issue.

The brief for the feasibility study points to some of the options available. Loans could be addressed to different student populations, according to the cycle they are in (bachelor, master or doctorate), their personal circumstances and whether they are participants in existing mobility programmes or ‘free-movers’.

Loans could also cover different costs, from living and maintenance to tuition fees or administration costs.

It might be a top-up to existing grants or some other form of loan.

Differences in living costs between countries will have to be taken into account. This is particularly tricky where a student is taking out a loan to study in a high-cost country, but would be expected to repay the money when working in a country where income levels are lower. Repayment could depend on income or other factors and the money collected by the lender or through national tax or insurance schemes.

Financial partner

One likely partner in a future loan facility would be the European Investment Bank (EIB). It has already supported student-loan schemes in Hungary, Italy and the German Länder, but with the aim of boosting the local knowledge economy rather than encouraging mobility. Its partners have been local banks or state-owned loan companies, with guarantees coming from governments or universities themselves.

The EIB floated some ideas for setting up a European loan scheme earlier this year, such as the creation of a fund to provide financing or guarantees to banks issuing loans, or the establishment of a ‘special purpose vehicle’ at the EU level to issue loans.

Another option would be to find a bank with an extended network that could make loans available in several countries.

Finding someone to guarantee a pan-EU scheme and finance defaults would be a major challenge in each case, and not a task that the EIB would be able to take on itself. By way of encouragement, it notes that default rates have been very low in the microfinance fund that it runs through local banks in the western Balkans.

Low opinion of loans

The decision to move ahead with this project has not been welcomed by Europe’s students, who have a long-standing antipathy to loans. “They are a way in which governments are slowly withdrawing from the public financing of higher education,” said Ligia Deca, who chairs the European Students Union (ESU). “Loans basically mean an individual contribution to education.”

In particular, she doubts that a loan facility would help achieve the Commission’s goals. “It is probably not going to affect the categories [of student] that are already debt-averse, so it is not solving the inequalities in the status of mobile students,” she said.

The ESU would prefer to see the creation of a European mobility fund, extending beyond the borders of the EU. “You have to put money where the political commitment is, and establishing a loan agency is not exactly doing that,” Deca said.

Ian Mundell is a freelance journalist based in Brussels.