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STUDENT LOANS (AMENDMENT) BILL

Explanatory and financial memorandum

INTRODUCTION

  1. This Explanatory and Financial Memorandum has been prepared by the Department for Employment and Learning in order to assist the reader of the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.
  2. The Memorandum needs to be read in conjunction with the Bill. It is not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require an explanation or comment, none is given.

BACKGROUND AND POLICY OBJECTIVES

  1. There are two types of student loan paid for from public funds. These include mortgage style loans for living costs for students in higher education prior to 1998 provided for under the Education (Student Loans) (Northern Ireland) Order 1990 (N.I. 11), the “1990 Order” and income contingent repayment loans for fees and living costs for students in higher education since 1998 provided for under the Education (Student Support) (Northern Ireland) Order 1998 (N.I. 14), the “1998 Order”.
  2. Student loans are currently excluded by provisions in regulations made under the Education (Student Support) ( Northern Ireland) Order 1998 (N.I 14) from a borrower’s bankruptcy debts, so that upon discharge from bankruptcy the borrower remains liable to repay the student loan.
  3. Individual voluntary arrangements (IVA) were created by the Insolvency ( Northern Ireland) Order 1989 (N.I 19). IVAs are intended to be a more flexible alternative to bankruptcy avoiding some of the restrictions which apply to a bankrupt.
  4. At present, the treatment of student loans under an IVA differs from their treatment under a bankruptcy.
  5. The Department considers that it is anomalous to exclude student loans from bankruptcy but not from Individual Voluntary Arrangements (IVAs). Student loans are made on non-commercial terms, including low interest rates and the obligation to repay being linked to a borrower’s subsequent income. In addition, as student loans are paid out of and subsidised by public funds, the Department does not consider it appropriate to allow borrowers to reduce or limit their liability to repay by entering into IVAs.
  6. To give effect to this policy the Student Loans (Amendment) Bill extends the Department’s regulation making powers under 1998 Order (and the 1990 Order to the extent that it exists under savings provisions) to allow provisions to be made to exclude student loans from IVAs in Northern Ireland.

CONSULTATION

  1. The Department conducted a public consultation on the legislative proposals from 23 July 2009, running for more than 13 weeks, and ending on 23 October 2009. The consultation document was circulated to over 200 organisations in accordance with guidance from the Machinery of Government Division of the office of the First Minister and deputy First Minister and the Equality Scheme of the Department for Employment and Learning.
  2. The Department received 13 responses to the consultation, none of which elicited any objection against, nor any alternative to, the proposals.

OPTIONS CONSIDERED

  1. The two options under consideration were to do nothing and leave the legislation unaltered or to introduce amendments to existing primary legislation to ensure the exemption, under subordinate legislation, of student loans from individual voluntary arrangements in Northern Ireland. The latter option was selected in the interests of consistency of treatment of loans under bankruptcy, responses to the public consultation and the potential implications for the public purse.

OVERVIEW

  1. The Bill contains one clause.

COMMENTARY ON CLAUSE

The clause in this Bill amends the 1998 Order and the 1990 Order by extending regulation making powers to provide that a student loan made to a borrower who enters an individual voluntary arrangement (IVA) in Northern Ireland will be treated in a similar way as it is currently treated under a bankruptcy.

FINANCIAL EFFECTS OF THE BILL

  1. The Bill facilitates the protection of public funds disbursed through student loans, ensuring they can be recovered in full not reduced under an individual voluntary arrangement at a cost to Government.

HUMAN RIGHTS ISSUES

  1. The Department considers that the provisions in the bill are compatible with the Convention on Human Rights.

EQUALITY IMPACT ASSESSMENT

  1. The Department has conducted a preliminary equality impact assessment on the policy proposals. The policy was screened out from a full equality impact assessment as the Department found no evidence to suggest that it would adversely impact the equality of opportunity or the promotion of good relations on any Section 75 category. A copy of this assessment can be obtained from the Equality Unit, Department for Employment and Learning, Adelaide House, Adelaide Street , Belfast, BT2 8FD .

SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

  1. The Department considers that no additional burden will be placed on business, charities or voluntary bodies as a result of this bill.

LEGISLATIVE COMPETENCE

  1. The Minister for Employment and Learning has made the following statement under section 9 of the Northern Ireland Act 1998:

“In my view the Student Loans (Amendment) Bill would be within the legislative competence of the Northern Ireland Assembly.”