Students outwit SLC

Loans from the publicly funded Student Loan Company (SLC) were made 'bankruptcy proof' by changes introduced last week as part of the Higher Education Act. But it is feared students will sidestep the move by paying off SLC debts using credit from banks and credit cards, which do not benefit from the new protection - and then declaring bankruptcy.

Keith Stevens, insolvency partner at Wilkins Kennedy, said: 'That gets around the closure of the loophole. I think it should be deemed irresponsible but the DTI have not issued guidelines on what they consider to be so.'

Last week, Accountancy Age revealed that student bankruptcies have rocketed by 40% since changes introduced in April, which reduced the period of bankruptcy from three years to less than 12 months.

But they also mean 'irresponsible' or otherwise culpable bankrupts can be hit with a Bankruptcy Restriction Order (BRO), extending the period before discharge to up to 15 years.

Stevens warned: 'The new insolvency regime means 'culpable bankrupts' can really be put through the grinder. Students thinking of bankruptcy might be put in that category.'