Student Loans and Bankruptcy

Student Loans must be repaid...

One of the most popular questions we get asked by students and graduates is, If I am made bankrupt, will I still have to repay my student loan?

The Answer is Yes. Since 1 September 2004 all outstanding student loans cannot be claimed in bankruptcy. They remain the responsibility of the (former) student to repay within the terms of the loan arrangement.

If you were made bankrupt before 1 September 2004 you may still have to repay your student loan. Clarification should be requested from the Official Receiver who is dealing with your affairs.

See also:

• What is Bankruptcy?
• Bankruptcy FAQs
• Disadvantages of Bankruptcy
• The Effects of Bankruptcy

Student Loans and Bankruptcy – the facts

Please note that there exist two types of Government student loan in the UK:-

The old type student Loans available to students who started their courses between September 1990 and August 1998 (or who were treated as continuing students when they started in the 1998/99 academic year).

They are repaid as a direct debit directly to the Student Loans Company (SLC) in equal instalments which begin in the April following graduation, but these repayments can be deferred if the graduate's income is low enough. They are usually referred to as ‘mortgage-style’ loans.

The second type of student loans were introduced in September 1998 for all new students from then onwards.

These are sometimes called income-contingent loans, and are repaid through the tax system after graduation. The amount of repayment will depend on the amount you are paid by an employer or earn as someone who is self-employed.

It was for a time possible to discharge yourself from liability to repay (that is, cancel) the second type of loan by declaring yourself bankrupt, and over 1000 students and graduates did just that. The Government had never intended to allow this, however, and in England and Wales they used the Higher Education Act of 2004 to close the loophole. Similar provisions have since been made for Scotland and Northern Ireland.

Mortgage-style loans were always protected from bankruptcy so the law in relation to these remains unchanged. Therefore, regardless of the type of loan that you have (and whilst you are still able to declare yourself bankrupt should you wish to do so) any outstanding student loans will not be cancelled and must still be repaid according to the loan agreement you signed.

If you would like any further information and advice about UK bankruptcy law and the possible alternatives to going bankrupt, please contact Money Advice Direct bankruptcy team on 0800 074 6918.

The service can advise on all aspects of bankruptcy law including the Disadvantages of Bankruptcy, How to File for Bankruptcy, How to Avoid Bankruptcy and the Effects of Bankruptcy.

back to top

What is bankruptcy? | Bankruptcy explained | The bankruptcy process | The effects of bankruptcy | The disadvantages of bankruptcy | How do I petition for my own bankruptcy? | What happens after bankruptcy? | What are the alternatives to bankruptcy?| Can my bankruptcy be reversed? | Can my bankruptcy be cancelled? | New legislation - the Enterprise Act 2002? | Frequently asked questions | Bankruptcy additional facts | UK Personal Bankuptcy | Bankruptcy Records | Bankruptcy Advice | What happens when you visit the Official Receiver's Office? | What happens to my home in bankruptcy? | What happens to my pension in bankruptcy? | When will my bankruptcy end? | How am I made Bankrupt? | Where is the Bankruptcy Order made? | Who will deal with my bankruptcy? | Who do I need to tell if I go bankrupt? | What are your duties as a bankrupt? | What effect will Bankruptcy have on your credit rating? | Payment to your creditors in Bankruptcy | What happens to your assets in bankruptcy? | What is a bankruptcy restriction notice? | What is a form J restriction? | What happens in bankruptcy if I rent my house? | What happens to your life assurance policy in bankruptcy? | What happens to your business in bankruptcy? | What happens to your wages in bankruptcy? | What are bankruptcy restrictions orders and undertaking? | Debts you have incurred after you have been made Bankrupt | What are the advantages of going Bankrupt? | What are the disadvantages of going Bankrupt? | What are the implications of  Bankruptcy? | Jersey - a guide to Bankruptcy Law | Bankruptcy Law | Student Loans and Bankruptcy | Bankruptcy Forms | Avoid Bankruptcy | Business Bankruptcy | Accountant in Bankruptcy | Bankruptcy Lawyers | Bankruptcy Search | Bankruptcy in the UK | Declaring Bankruptcy | Filing for Bankruptcy | How to go Bankrupt | Insolvency Practitioners | Voluntary Bankruptcy | How do I avoid Bankruptcy? | Consequences of Bankruptcy | Borrowing after Bankruptcy | Bankruptcy and Student Loans | Annulling the Bankruptcy | Bankruptcy - The Court | Bankruptcy Bank Accounts | Debt Resolution Forum | Mortgage after Bankruptcy | Personal Bankuptcy | Bankruptcy Mispellings