Student Loans and Bankruptcy and Debt Management

With university fees recently being raised, more and more students attending university are finding themselves in debt with student loans. For many students paying the fees for university is a hybrid of help from parents and family, working part-time, and student loans or in some instances bursaries or grants. Combined students can come up with the thousands of pounds required in order to obtain that much sought after higher education degree.

Many students after graduation may find that the three (3) plus years attending university have racked themselves up a sizable portion of debt. They may have student loans, credit cards, an overdraft, etc, and now they are to enter the workforce and begin repaying these debts.

Student loans are a bit easier in their repayment terms as you do not begin repaying them until you are working, and then the payments are based on what you are earning.

There are new and different repayment schedules depending on when you went to university. If you started uni prior to September 1, 2012, the income threshold before you begin paying back is £15,795 annually. Any income you have that exceeds this amount, you make payments on a percentage (9%) of this higher income amount.

An example would be if you earn £18K a year, which is £2,205 over the threshold, and 9% of this is £198, or £16 a month is what you would be paying.

If you started uni after September 1, 2012, the income threshold is £21K annually and then you pay back 9% of any higher amount.

Student loans must be repaid if you earn above the income threshold. If you are not working, then you will not earn above the income threshold.

Unfortunately for some students they may not only have their student loans to consider repaying, but they may also have some credit cards, loans, overdraft, etc, that also has to be paid. And the recent uni graduate may find themselves struggling with these payments.

In seeking out debt help or solutions to repaying the debts various forms of debt management many be considered as well as forms of insolvency such as an IVA/Individual Voluntary Arrangement and bankruptcy.

The bottom line is that student loans cannot be included in any form of insolvency such as an IVA or bankruptcy, and they technically cannot be included in any form of debt management. Student loans need to be repaid. However keeping in mind you do not pay them back until you are working and the threshold of wages required and the percentage used for payments, can make the repayment of student loans much easier than any other form of debt one may have.

This doesn’t rule out the possibility of someone placing their other debts in a debt management plan or IVA, or even going bankrupt if need be, but the student loans will be excluded. Of course it is the thought that if someone gets their other debts under control, then they could afford to repay the student loans much easier. Especially if someone was to go bankrupt and discharge all their unsecured debts, excluding the student loans. Then they would only have the student loans to repay as all the other debts would be discharged or written off.

So for many people student loans are an inevitable fact of university life and needed in order to complete one’s education. And while they cannot be discharged in bankruptcy or rolled into some form of debt management, there is some degree of flexibility in the repayment process.