Converting all or part of a Loan into an MSD debt

Once a Student Loan has been approved, if it is identified that a borrower was not entitled to all or part of their Loan, an MSD debt may be created for those parts.

Changes to entitlement can include (but are not limited to) situations where a student:

• does not meet the performance requirement
• is declared bankrupt
• receives another form of study related government assistance
• is in prison
• receives living costs while in part-time study
• starts or ceases to receive a benefit
• does not meet their obligations under the Student Loan contract

For more information about eligibility and entitlement see:

• Eligibility and entitlement criteria for a Student Loan
• Applications

A student's circumstances need to be considered to determine if a MSD debt should be established. The student's study details and all relevant circumstances need to be confirmed.

MSD debt should be established if all the facts confirm money has been received when there is no entitlement and it would be reasonable, considering all the circumstances, to do so.

For information on whether to include the establishment fee or any interest charged prior to April 2012 in MSD debt, refer to Knowledge Base.

If MSD debt is established, the possibility of a debt write-off should be considered before recovery commences.

MSD is entitled to recover a debt to the Crown established as a result of a payment to any person, including a third party, to which they were not entitled to.

When a Student Loan payment has been converted into MSD debt, MSD is entitled to recover the debt by:

• deduction from any subsequent Student Allowance payments or
• deduction from any subsequent payments made to them of a benefit under the Social Security Act 2018 or
• deduction notice under regulation 217 of the Social Security Regulations 2018 or
• civil suit through the Courts