I’ve been screwed over by SLC doing the same thing, I was in the advantageous position of working for the institution and knew the director of finance from union negotiations – it appears to be quite normal that this sort of thing happens – mine happened because I was switched from one course to another mid-course, not my choice and I had no say in the matter – SLC assumed that because I didn’t re-apply for a new course, and just asked to roll over the previous application, that I was no longer on the course – so they never paid.
I got a whole heap of pestering e-mails etc. from finance lackey’s etc. and generally told them to speak to the SLC and leave me alone – eventually, the SLC sorted themselves out.
In terms of can they take your degree away – once you have graduated, then the qualification is conferred on you – unless there is some kind of academic concern for your work – plagiarism, cheating in exams, then it’s yours – generally with fees, the uni will bar you from graduating and not award the qualification, since they have done that, then they have very little leverage with you.
In terms of Phd. – I wouldn’t give my university corporately as the referee, and give a specific tutor who has agreed to do it, dissertation supervisor is a good bet – they are probably unaware that you are being chased for the money, and are unlikely to mention it – it’s an academic reference.