Old style student loans – some problems

Two Debt Camel readers have asked questions about old-style student loans. These were loans taken out between 1990 and 1998, where the payments can’t be taken directly from your wages. They are also called mortgage-style or fixed-term loans.

These old student loans will be written off when the last year’s loan is 25 years old, or a bit earlier for older students, see The Education (Student Loans) Regulations 1998 paragraph 12 for details. But that’s a few years off for most people and problems are cropping up now.

Mr J’s debt – probably statute barred

Mr J asked:

A debt collector has been chasing me for over 8 years for a student loan taken in 1995. I haven’t made a payment or deferment since 1999. There has been no contact in writing since this date by myself.

Every year I get a statement from them asking for payment. I own my own house and am concerned that one day in the future they may go for a charge to secure the debt. Do I just keep ignoring letters each year or do I send a “statute barred letter” to end matters?

A debt is statute barred when a creditor has waited too long to go to court for a CCJ  I’ve looked at this in Common questions about Statute Barred Debts. If this has happened, if a court case is started you can defend it and not get a CCJ.

For most debts, including old style student loans, this period is six years during which you haven’t made a payment or acknowledged the debt in writing. The first payment for one of these loans was usually due in April after your degree finished, so the six year period would have started then if you never paid anything, or a month after your last payment if you did start repaying.

Deferred repaying your loan because you earned too little would count as acknowledging the debt, so the six year clock would start again. If you have deferred every year, you won’t have paid anything but the debt still wouldn’t be statute barred!

But in the case of Mr J, it sounds as though his the debt is probably statute barred. Mr J could send a statute-barred letter (there is a template in the Common Questions link above) or he could just continue to file the letters he is getting until 2020, when his loans will be written off if his last student loan was taken out in 1995.

There doesn’t seem much to gain from sending the statute barred letter. The debt still legally exists even if it is statute barred. The debt collector would probably continue to send an annual letter.

Mr J doesn’t need to worry about the debt collector getting a charge over his house. Before this could happen, there would have to be a CCJ and being statute barred is a good defence against a CCJ. The debt collector has his correct address so if they send him a Letter Before Claim, which has to happen before a court case is started, Mr J can explain then that the debt is statute barred. See How to reply to a Letter Before Claim for details.

Ms P’s student loans – a very old CCJ

Ms P asked:

I had a student loan in 1992 and was under the assumption that I would not have to start repaying until I earned £17,000. I have never earned that much, I left university early due to ill health and haven’t worked since 1997.

24 years later, I get a letter from a debt collector saying they are acting on behalf of Erudio Student Loans. After a few quite rude/abrupt phone calls I wrote a letter regarding the statue of limitations. After 5 months the calls started again, now they are claiming a CCJ was taken out in 1997 – I have no recollection of this – so the debt can’t be statute barred… Can Erudio enforce this CCJ? 

Ms P either never completed the correct documentation every year to defer her loans or it wasn’t correctly handled – the Student Loan Company doesn’t have a good reputation for administration. It’s not clear why Ms P never received the CCJ papers, but Erudio did eventually produce some evidence that there had been a CCJ.

The debt collector is right to say that a CCJ never becomes statute barred. But after six years a creditor has to return to court to get permission to enforce it. This might sound like some formality, but it’s not, it’s very unusual.

Before the court agrees that a CCJ over 6 years old can be enforced, the creditor has to show that there are some unusual circumstances why it didn’t take action within the six year period. Forgetting about it or not being able to find you are not good enough! The more time goes on, the less chance there is of a court agreeing – after 20 years this is extremely unlikely.

Should you have started to make payments?

Perhaps you have started making payments after you were contacted by a debt collector, but now wonder if your debt was statute barred or a CCJ was too old to be enforced? Talk to a debt adviser to discuss your options. Once a debt is statute barred it will always remain so. Any recent payments you made after that point won’t have changed this.

Don’t let the fact you can’t prove what happened many years ago stop you from getting advice. It’s not reasonable to expect people to still have copies of letters written in 1999 or their 2001 bank statements… That is exactly why there are time limits on legal action.

National Debtline has a good fact sheet on these old style student loans and they would be good people to discuss your case with.

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