Student loans

There are two types of student loans and different rules apply depending on when the client took out the loan. Student loan agreements are simple contract debts, and this gives the company pursuing five years from the date a client last paid or acknowledged the debt to go to court to enforce the agreement.

Old-style ‘mortgage’ student loans are Consumer Credit Act agreements. Payments cannot be automatically deducted from wages. Court action has to be taken before the debt can be enforced. This means that the time limits can apply if a client has not paid or acknowledged the debt for over five years.

Advisers should be aware that a client asking for the loan to be deferred may count as acknowledging the debt and start the prescription period again.

From September 1998, ‘new-style’ or ‘income contingent’ student loans include rules that say repayments will be automatically deducted directly from wages or through a client’s tax return if they are self-employed. This means that the Student Loans Company can still take money for a loan after five years, as it does not have to go to court to do this.