Commentary on Sections and Schedules Part 4 - Student Support.Effect of bankruptcy
61.In England and Wales, student loans are currently provided under regulations made under section 22 of the Teaching and Higher Education Act 1998. Previously, student loans were provided under arrangements made under the Education (Student Loans) Act 1990. Although loans can no longer be provided under the 1990 Act, some loans made under it are still outstanding.
62.In section 42, subsection (1) inserts a new paragraph (f) into section 22(3) of the 1998 Act. With this new paragraph, it will be possible for regulations under section 22 to include provision relating to the effect of bankruptcy on the liability to repay student loans provided under the 1998 Act. It is intended to use this power to ensure that the liability to repay student loans is not cancelled by the bankruptcy of the borrower. Regulations under section 22(3)(e) of the Teaching and Higher Education Act 1998 already provide that funds advanced under student loans cannot be taken by a student’s trustee in bankruptcy to pay off other debts. By virtue of section 42(2), the new paragraph (f) will extend to Northern Ireland, as well as to England and Wales. Subsections (3) and (4) of section 42 make amendments of the Education (Student Loans) Act 1990 relating to the effect of bankruptcy.
63.The changes made by section 42 will not affect the position of any borrower whose bankruptcy commences before the section comes into effect.
64.By virtue of section 281 of the Insolvency Act 1986, when a bankrupt is discharged, he is released from all his bankruptcy debts. The amendment to section 22 of the 1998 Act, together with the regulations proposed to be made under section 22 as amended, and the amendment of the Education (Student Loans) Act 1990, will have the effect of excluding student loans from bankruptcy debt. It follows that student debt in relation to both types of loan will not be written off on discharge from bankruptcy.