RSM TENON’S personal bankruptcy head has warned students that applying for bankruptcy will be no solution to the bigger university fees planned by the government.
Mark Sands said a bankruptcy order after university could seem attractive, however, government student loans, from student loan companies, are unaffected by bankruptcy orders.
A statement on the Insolvency Service’s website says: “Since 1 September 2004 all outstanding loans cannot be claimed in bankruptcy. They remain the responsibility of the (former) student to repay within the terms of the loan arrangement.”
He added that earlier this year student loans were also excluded from the Individual Voluntary Arrangement process, where a person repays a percentage of the debt over five years.
The government recently announced it would increase fees to £9,000 in some universities with a basic threshold of £6,000.
Some in the profession have said that, with the increased fees, bankruptcies may increase as students battle to pay back the loans and costs incurred from obtaining a higher education.
Sands stressed that there are some long-term consequences to consider.
He added there are some professions that are regulated and may take a bankruptcy into consideration as they can linger on a credit report for up to six years.
Sands added it was also very close to fraud to take out a loan with no intention of repaying it.
Commercial loans, overdrafts and credit cards can be written off in a bankruptcy.
National Union of Students president Aaron Porter (pictured) said: “The only things that students and their families could expect in return for higher fees are higher debts.”
*NUS photo courtesy of Leo Reynolds, flickr photostream
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