IMPORTANT

The current information is accurate as at December 2007. The information below should be used as a guide only. Links to further information will be given where necessary.

 

What are Student Loans?

 

Student loans are offered by the Government to help students finance the costs of Higher Education (i.e. course fees, living costs, etc).

 

A student will usually apply for a student loan before they start University but may apply for more finance during the course of their education (commonly 3 years). The amount that a student will receive is usually dependant on how much their parents earn, if the student is living at home, their course year, etc

 

After leaving University, the average student debt is around £13,000, with student loans accounting for a majority of the borrowing.

 

Interest is added to the student loan: interest equals the current rate of inflation (currently around 4.8% - December 2007).

When Do Repayments Begin

Students are expected to start repaying their loan the following April after they finish their course, regardless of whether they graduate or not.

However, repayments will only begin when a student is earning over £15,000 (gross) per year, £1250 per month, or £288 per week. If they are not earning this amount, repayments will be deferred until their income reaches this threshold. Should a student’s income fall below this level during their career, student loan repayments will freeze until they are again earning above the threshold.

What are my Duties as an Employer?

If an employer takes on an employee that has an outstanding student loan, it is the employer’s duty to deduct repayments from the employee’s wage and forward them to the Inland Revenue (through the PAYE system).

Employers will automatically be sent a ‘Start Notification’ from the Inland Revenue to notify them when to start deducting repayments from the employee’s weekly/monthly wage.

What to do When You Recieve a Start Notification

To work out the employee’s student loan repayment, work out the employee’s gross pay that you would normally use to calculate National Insurance Contributions.

For example, if an employee’s gross pay was £16,000:

Weekly gross pay = £307.69

Monthly gross pay = £1333.33

With this figure in mind, use the Student Loan Deduction Tables (provided by the Inland Revenue) to work out the weekly/monthly repayment.

In the above example, using the deduction tables, the repayment would be:

Weekly: £1 per week (if the employee is paid weekly)

Monthly: £7 per month (if the employee is paid monthly)

Further Information on How to Repay Student Loans

Employers and employees with student loans should look at both links below to get a better understanding of how to repay student loans, in addition to general FAQ’s.

Employer’s Information (HMRC)