Can Your Student Loan Be Included in a DRO or IVA?
You’re staring at £45,000 of student loan alongside £8,000 of credit card debt from the years since graduating, and every debt-relief guide you’ve read talks about wiping the slate clean. Then you get to the small print and see the words “student loans are excluded” — and the whole thing suddenly feels pointless. It isn’t. The exclusion is real, but it’s narrower and less discouraging than it first looks.
Quick answer: No — UK student loans cannot be included in a Debt Relief Order, an IVA, or bankruptcy. They continue under their original terms regardless of which formal debt solution you use. But here’s the part most guides skip: your student loan doesn’t count toward the £50,000 DRO debt ceiling either. Someone with £45,000 of student loan and £8,000 of other unsecured debt is assessed on the £8,000 for DRO eligibility purposes, not £53,000.
Why student loans are excluded from all three
Debt Relief Orders, IVAs, and bankruptcy all draw from the same underlying framework, and all three treat UK student loans the same way: excluded entirely. The loan isn’t discharged, isn’t reduced, and isn’t paused by any of these processes. It carries on exactly as it was before, with the same income-contingent repayment structure and the same eventual write-off date — 30 years after you become liable to repay for Plan 2, 40 years for Plan 5.
The reasoning behind the exclusion is that a UK student loan already behaves differently from ordinary debt. It’s not a fixed monthly obligation you’re at risk of defaulting on in the conventional sense — repayments are automatically calculated as a percentage of income above a threshold, and if your income drops, so does the repayment, sometimes to zero. Formal insolvency processes exist to deal with debt that’s actively causing financial harm right now. A student loan, structurally, usually isn’t doing that in the same way a credit card at 27% APR is.
The part that changes the calculation entirely
This is the detail that gets buried in most explanations: excluded debts don’t just fail to get written off — they don’t count toward the eligibility thresholds either. For a DRO specifically, Citizens Advice and StepChange are both explicit about this. Your student loan sits completely outside the £50,000 calculation, regardless of its size.
That means someone could have £70,000 of student loan debt and still be eligible for a DRO on £6,000 of credit cards and an overdraft, provided they meet the other criteria — £75 or less spare income a month, and under £2,000 in assets (excluding a vehicle worth less than £4,000). The size of the student loan is irrelevant to that calculation. It’s common for people to assume a large student loan disqualifies them from help with everything else. It doesn’t.
What actually happens to the student loan while you’re in a DRO, IVA, or bankruptcy
Nothing changes about how it’s collected. Repayments keep being deducted through PAYE exactly as before, calculated the same way, at the same threshold and rate. If your income during the DRO or IVA period is below your student loan repayment threshold, you won’t be paying anything toward it anyway — which is often the case for people in genuine financial difficulty, since a low enough income is usually part of what made the DRO or IVA appropriate in the first place.
If you’re in an IVA specifically, your monthly IVA payment is calculated based on what’s left after your essential outgoings — and your student loan repayment, where one is due, is treated as one of those essential deductions from income, not something you negotiate away. The insolvency practitioner accounts for it when working out what you can actually afford to pay into the arrangement.
Which formal option actually fits your situation
Debt Relief Order — the cheapest and simplest route if you qualify: under £50,000 in qualifying debt (student loan excluded from that figure), under £2,000 in assets, £75 or less spare monthly income. Free to apply since April 2024. Debts are frozen for 12 months and written off if your situation hasn’t improved.
IVA — for people with more spare income than a DRO allows, or debt above the DRO ceiling, who want a structured route to writing off what’s left after a fixed period, typically five years. Requires a formal arrangement through an insolvency practitioner and consistent payments throughout.
Bankruptcy — the most severe option, generally considered when debts are too high for an IVA to be realistic or a DRO’s asset limits rule it out. Costs £680 to apply and has more serious consequences for homeowners and certain professions.
In every case, the student loan sits outside the process — but as shown above, that doesn’t mean it prevents you from getting help with everything else.
One thing to check today: add up only your non-student-loan unsecured debts — credit cards, overdrafts, personal loans, catalogue debt, any BNPL balances that have gone to collections. That figure, not your total debt including the student loan, is what actually determines DRO eligibility.
A worked example
Say a graduate has £38,000 outstanding on a Plan 2 student loan, plus £4,200 across two credit cards and a £1,300 overdraft — £5,500 total in non-student-loan debt. Their essential outgoings, including rent, bills, and food, leave them with £60 spare a month after everything, and they have no savings or valuable assets. Because the student loan is excluded from the £50,000 DRO ceiling entirely, the only figure that matters for eligibility is the £5,500 — comfortably under the limit. Combined with £60 spare income (under the £75 threshold) and no qualifying assets, this person would likely be eligible for a DRO, and their credit cards and overdraft could be frozen and written off after 12 months if their situation doesn’t improve.
Their £38,000 student loan carries on completely unaffected. If their income stays below the Plan 2 threshold throughout the DRO, they won’t be making any student loan repayments during that period anyway — not because of the DRO, but because the loan’s own income-contingent rules mean nothing is due below the threshold regardless of what else is happening financially. The DRO and the student loan are, in practice, running on entirely separate tracks.
Now compare that to someone with the same £38,000 student loan but £52,000 in credit card and personal loan debt from a period of genuine financial difficulty. That £52,000 exceeds the DRO ceiling on its own, so a DRO wouldn’t be available — an IVA or bankruptcy would need to be considered instead, based on the same £52,000 figure. The student loan still doesn’t factor into which of those routes is realistic; it’s excluded from the calculation in an IVA and bankruptcy in the same way it is for a DRO.
FAQ
Does my student loan affect whether I qualify for a DRO?
Not through the £50,000 debt limit — it’s excluded from that calculation entirely. It can indirectly affect the income test, since your student loan repayment (where one is currently due) is deducted from your income like any other essential outgoing when working out your spare monthly income.
Will a DRO, IVA, or bankruptcy show my student loan as written off?
No. Only the debts included in the arrangement are affected. Your student loan balance, repayment terms, and eventual write-off date stay exactly the same, and it won’t appear as discharged or resolved anywhere in the DRO, IVA, or bankruptcy paperwork.
I only have a student loan and no other debt — is there any point in a DRO?
Generally no. If the student loan is your only significant debt, a DRO achieves nothing, since the loan can’t be included and its income-contingent structure already protects you from the kind of financial harm formal insolvency is designed to address. Speak to StepChange before applying to confirm a DRO would actually help your specific situation.
Does this work the same way in Scotland or Northern Ireland?
The equivalent processes exist (Minimal Asset Process in Scotland, for example) but the specific rules, thresholds, and terminology differ from the DRO framework in England and Wales described here. Get advice specific to where you live before assuming the same numbers apply.
For the full picture on UK debt relief options, visit our UK debt help hub, or read more in our Students pillar guide.
Written by Hamid Ali, MSc Accounting & Finance, ACCA in progress, Founder of DebtShift.