CSLM16030 - SL & PGL repayments: calculation of loan repayments: how are repayments calculated?

Simple calculation

The simple calculation of Student Loan and or Postgraduate Loan repayments is

• Borrower’s income

Less threshold for the relevant loan and or Plan type

Balance (income less threshold) X rate = Student Loans and or Postgraduate Loan repayments for the year

However, the following points should be noted

Note: Student loan Plan 1, Plan 2 and Plan 4 have a different threshold and same rate

Postgraduate loan have a different threshold and rate

Student Loan plan 1 or 2 or 4 and Postgraduate loan can be repaid at the same time.

Income

1.	Employment income - The amount of income to include for Student and or Postgraduate Loan repayment purposes is the earnings figure as would be calculated for employer’s secondary Class 1 NICs. (Not income liable to tax). This requires particular attention when the borrower receives benefits and / or expenses.
2.	Trading income - In calculating the income for the tax year the following should be excluded
	- Unearned income if the amount of such income is less than £2,000. For more information see CSLM16035
	- Income which has been relieved by losses under ITA 07/S64(2)
	- Income which has been relieved by annuities, and so on for which relief is given under Part XIV ICTA 1988
	In cases of difficulty refer the matter to your manager.

Threshold

Where the repayments are calculated on total income for the year, for example where the borrower is self employed, there is no problem with the threshold. However, where a borrower is liable to PAYE then each pay period has to be looked at in isolation by the employer and the threshold is the pro rata amount of the annual threshold that relates to that pay period. Payroll software will take care of this calculation for the employer.

For weekly or monthly paid borrowers the appropriate pro rata thresholds and rates can be found in the SL3: Student Loan and Postgrauate Loan deduction tables. However payroll software will automatically use the correct amounts.

Apparent inconsistencies can arise if irregular amounts, such as bonuses, are paid in certain pay periods. This is brought to your attention in case queries are received.

Examples can be found in the SL3 tables

Although the employer has deducted repayments correctly, the borrower’s income for the year does not exceed the threshold. In these circumstances the borrower may claim repayment from the Student Loans Company.