BusinessBusiness RecoveryStudent bankruptcy on the rise

Student bankruptcy on the rise

Almost £10m in debts has been written off by the Student Loans Company (SLC) because of a surge in student bankruptcies following the 'softening' of the procedure in April.

Link: Student bankruptcy loophole

Accountancy Age has learned that student bankruptcies have rocketed by 40% since the changes, which reduced the period of bankruptcy from three years to less than twelve months.

However, fears of a stampede into bankruptcy by thousands of students tempted at the prospect of emerging debt free in a matter of months appear to have proved unfounded.

Just 1,040 more SLC customers are now bankrupt since the changes were made, bringing the total up to 3,563 customers.

Based on the assumption that each extra bankrupt student wrote off a SLC debt of £9,100 (the average for a three-year course ending in 2003), the total cost to the taxpayer is £9.5m.

Gareth Kagan, a debt recovery specialist at commercial law firm Bond Pearce, said: ‘After the Enterprise Act, it’s much easier to go into bankruptcy and come out the other end, at least first time round.’

The number of student loans written off through bankruptcy had been heading skywards even before April’s changes, having trebled between 2002 and 2003. The DfES said the latest rises were ‘not exceptional’ and represented just a tiny fraction of students.

The government has used the Higher Education Act to stop the haemorrhaging of cash from the publicly funded SLC due to bankruptcies. The DfES said that, from yesterday, student loans would survive bankruptcy.

Email Brian_Moher@vnu.co.uk.

Related Articles

Investment firm acquires Avon Steel Company Limited

Business Recovery Investment firm acquires Avon Steel Company Limited

4d Emma Smith, Managing Editor
Manchester law firm enters into administration

Business Recovery Manchester law firm enters into administration

4d Emma Smith, Managing Editor
KPMG appoints new global head of insolvency

Business Recovery KPMG appoints new global head of insolvency

3w Emma Smith, Managing Editor
EY hired by Carillion to review finances

Accounting Firms EY hired by Carillion to review finances

5m Alia Shoaib, Reporter
Using insolvency as a debt recovery tool

Business Recovery Using insolvency as a debt recovery tool

6m Emma Smith, Managing Editor
UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

Business Recovery UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

8m Alia Shoaib, Reporter
Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

Business Recovery Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

9m Emma Smith, Managing Editor
FRP Advisory expands operation with new office, partner appointments

Accounting Firms FRP Advisory expands operation with new office, partner appointments

10m Emma Smith, Managing Editor