A debt recovery expert has outlined the key steps universities and independent schools should take when recovering unpaid student debts.

The issue has come under renewed focus following recent reports that nearly £500 million in unpaid or hidden debts is owed to UK universities, much of it linked to accommodation and other institutional costs.

According to Claire Twells, Partner at Smith Partnership and student debt recovery expert, many of the issues arise because students do not always understand that tuition and accommodation are separate contractual obligations.

Claire gave her top tips for universities and schools chasing unpaid student debts.

1. Make sure students understand what they have signed up to

Claire said: “University debts tend to fall into two main categories: tuition fees and accommodation fees. Students enter into contracts with universities which usually have very clear and concise contracts checked by lawyers.

“The difficulty is that many students do not fully understand what they are entering into.

“This is particularly common with accommodation contracts. Students are often desperate to secure somewhere to live because accommodation can be sparse in university towns and cities. What often happens is that the student leaves the course and simply leaves the accommodation as well.

“In the cases I work on, there appears to be a real misunderstanding that they have entered into a contractual obligation for a fixed period of time.

“Students often think tuition and accommodation are intrinsically linked, and that if they leave one, the other automatically ends. But they are two entirely separate contractual obligations.”

2. Use every available method of communication

Claire said: “Communication is key, whether you are dealing with a business or an individual. Universities need to make sure they hold every relevant piece of information about how they can communicate with the student.

“A common issue is that universities rely too heavily on the university email address. But if a student has already left the university, they may no longer be checking that inbox.

“If a student has emailed to say they have left the course, and the university then only continues to contact them through their university email address, that may not be enough.

“Institutions should be using personal email addresses, telephone numbers and postal addresses as well. They should also be making the effort to call students where appropriate.”

3. Put a robust internal recovery process in place

Claire said: “Universities do not always have the most robust processes in place when it comes to recovering unpaid debts. They need to make sure that their internal recovery process is consistent and clear.

“It is also important to remember that universities are dealing with students, so they need to make the process as easy as possible for them.

“If students can respond by text, many of them will. In my experience, text messages can be very effective. Students may not answer the phone, but they will often reply to a text.

“The pre-legal process should be concise, so that everyone internally knows what action has been taken and when the matter should be escalated.”

4. Know who is responsible for paying independent school fees

Claire said: “Independent schools face similar issues, but the person responsible for payment is not always the parent.

“In many cases, it may be the grandparents who are responsible for the fees. In other cases, payment may come from a trust fund, family wealth or even a limited company.

“There have been instances where correspondence has gone to the parents of the child, but the grandparents were actually responsible for paying the fees. If the school is not communicating with the person responsible for payment, that can create difficulties.”

5. Balance relationships with firm action

Claire said: “Independent schools need to preserve the relationship with parents, but it is important to remember that this is ultimately a business relationship.

“The school is providing a service, and the parents, or whoever is responsible for the fees, are paying for that service.

“Schools need to be professional and sensitive, but they also need to be robust enough to ensure payments are made regularly and cash flow is protected.”

6. Escalate once the internal process has been exhausted

Claire said: “Effective legal support can have a real impact. A letter from a solicitor carries more weight than a letter from a school or university.

“The right time to bring in legal support is when the institution has exhausted its own internal process. But that needs to be swift and concise.

“Some clients say they send five letters and make six phone calls before taking further action. But if someone has not paid after the second or third letter, they are highly unlikely to pay after the ninth.

“A good approach is to look at the credit terms. If payment is due within 30 or 60 days, add a further 30 days on top of that.

“If they have still not paid within that timeframe, and the institution has written to them on two or three occasions and attempted to call them, then the internal process has been exhausted.

“That is when legal support should be brought in.”

For Claire, the message for educational institutions is clear. By using all available communication channels and escalating matters at the right time, universities and schools can improve their chances of recovering unpaid debts while maintaining relationships with fee-payers.