Graduates seek bankruptcy to clear debt

Hundreds of students and recent graduates are seeking to declare themselves bankrupt in a bid to write off their student debt, the National Union of Students said this week.

Since it emerged this week that changes to insolvency rules meant student loans could be cancelled with a declaration of bankruptcy, the NUS has been "inundated" with calls from students wanting to know how to do this.

Guidelines issued last month by the Insolvency Service added student loans to the list of debts that could be cancelled by bankruptcy. Changes to the insolvency laws also mean that from next year some types of bankruptcies could be discharged in a year, instead of three years, raising the prospect of students taking a year off as bankrupts after graduation.

Students who entered university under the support system introduced in 1998 could have their debt written off, the NUS said.

The government immediately declared its intention to pass legislation to close the loophole ahead of the introduction of top-up fees in 2006.

"Government policy is, and always has been, that student-loan debt should not be written off with bankruptcy," said a spokesman for the Department for Education and Skills.