I would expect it is like any other debt- the deceased's Estate will be liable. If there is enough in the Estate to pay all creditors, including the SLC (or whatever it's called now), then these debts are paid before the residual estate is distributed to the beneficiaries. If the Estate isn't large enough to cover the debt then any residual debt is written off.
It is simpler than that, Factor.
If you die before the loan is repaid, the loan is written off. However this assumes that you have made repayments according the original terms until then.
Different rules apply in Scotland if you took out the loan after 1 September 2006, when the above statement may not be true.
Thanks for clarifying that, buildersmate.
It makes sense - outstanding repayments are deducted from income and have to be made only if your salary exceeds a certain figure (something like �15,000 p.a.), and once you die you certainly aren't going to be earning that sort of money!