Empey consults on closing legal loophole on student loans

Employment and Learning Minister, Sir Reg Empey, has launched a consultation exercise on student loans.

The proposals aim to align the treatment of publicly funded student loans under Individual Voluntary Arrangements (IVAs) with that for bankruptcy. This will focus on the Government recovering publicly funded student loans, not student finance arrangements in general. These are currently the subject of a separate, independent review.

The Minister said: “There is an anomaly in the system whereby publicly funded student loans are exempt from bankruptcy. This means that such loans cannot form part of a bankrupt’s estate and therefore the borrower remains liable to repay their loan irrespective of their bankrupt status. However, student loans are not exempt from IVAs which are an alternative to bankruptcy and the borrower can apply to have his or her loan balance written-off or reduced through an IVA.”

Emphasising the need to close this legislative loophole to ensure consistency of treatment and protect public funds, the Minister continued: “I know that student debt is a matter of concern for people and there are already safeguards built into the repayment system to protect low income and other borrowers.

“My priority continues to be safeguarding access to higher education for less well off students and their families. There must be a favourable package of student finance available to those who need it and can benefit from it. Student finance policy for Northern Ireland students is being considered as part of the ongoing review of variable fees and student finance arrangements.”

The Minister encouraged everyone with an interest to consider the new proposals and to let the Department have their views. The consultation paper is available on the website

Notes to Editors:

1. The proposals in the consultation document mirror similar proposals for England and Wales which form part of the Apprenticeships, Skills, Children and Learning Bill 2008/09 which is currently at Committee Stage in the House of Lords.

2. The consultation document is available on the Department’s website.

3. Student loans are made on non-commercial terms, and the obligation to repay is linked to a borrower’s income.

4. Media enquiries to the Department for Employment and Learning Communications Branch on 028 9025 7872 or out of office hours contact the Duty Press Officer via pager number 07699 715 440