Student Loans Company Increases Spending on Debt Collectors to Pursue Overseas Graduates

The UK’s Student Loans Company (SLC) has increased its spending on external debt collection agencies as it steps up efforts to recover unpaid student loans from graduates, including borrowers living overseas.

According to an analysis of SLC spending data, the organization spent £1.77 million on companies categorized as debt collectors between January and June 2026. That was nearly double the £948,074 spent during the same six-month period in 2025.

The SLC said the increase is part of broader efforts to strengthen its debt recovery operations and collect money owed by borrowers who are not meeting their repayment obligations.

Debt Collection Spending Rises

Between 2021 and June 2026, the SLC spent a total of £11.3 million on external debt collection agencies, including TDX Group and Experian. The organization uses these agencies in cases where borrowers fall behind on their payments or fail to provide required information after moving overseas.

Most graduates who remain in the UK repay their student loans automatically through the pay-as-you-earn, or PAYE, system. Repayments are deducted directly from their salaries once their income rises above the applicable repayment threshold.

The process is different for graduates who move abroad. Overseas borrowers are responsible for informing the SLC about their move and providing details about their income. They must then make repayments directly. 

These borrowers can include British graduates who move overseas as well as international students who attend universities in the UK and later return to their home countries. If borrowers fail to notify the SLC that they have moved abroad or do not keep up with their repayments, the SLC can refer the debt to external collection agencies.

Millions Recovered From Overseas Borrowers

Government figures show that the SLC recovered £7.7 million from non-compliant overseas borrowers during the 2024-25 financial year.

The figure was provided through a parliamentary question answered by Department for Education Minister Josh MacAlister. According to MacAlister, debt collection agencies generate an average return of £5 for every £1 spent.

The increase in collection activity comes amid wider concerns about unpaid student loan balances. Foreign/non-British national students received approximately £4 billion in tuition fee and maintenance loans during the past year, representing about 20% of total lending under the student loan system. Most of this lending went to EU citizens, while one in 20 first-time student loans went to Romanian students.

Research cited in the report found that foreign students were approximately 25% less likely to repay their loans than British borrowers. Figures also suggest UK taxpayers could lose between £1.2 billion and £2.2 billion each year through unpaid student loan debt.

SLC Says Higher Spending Is Part of Recovery Investment

William Yarwood, campaigns director at the TaxPayers’ Alliance, criticized the rising cost of debt collection and called for greater clarity about how much money is being recovered.

“Taxpayers are paying twice, first for defaulted loans, and now for record bills from private debt collectors,” Yarwood said. “Outsourcing enforcement shouldn’t be a blank cheque. If spending is skyrocketing, taxpayers deserve to know what is actually being recovered.”

He added that taxpayers “cannot keep bankrolling a broken system that costs millions to administer and billions to write off.”

The SLC said the higher spending was linked to investment in its debt recovery capabilities.

“As part of SLC’s three-year transformation program, the government is investing in SLC’s debt recovery capability,” an SLC spokesperson said. “As part of this investment, the annual spending on debt collection agency activity has increased.”

The Department for Education also said it expects borrowers to repay what they owe and is working with the SLC to strengthen collection efforts.

“The public rightly expect these debts to be paid and so do we,” a Department for Education spokesperson said. “That’s why we are investing in the Student Loans Company’s ability to collect debt and working closely with them to go further on getting back what is owed.”

The department also said it is working to address misuse of student finance by closing regulatory loopholes and preventing abuse of the system.