CSLM8501 - Compliance: borrower compliance: introduction

HMRC are responsible for collecting income-contingent student loan and postgraduate loan repayments on behalf of the Department for Education formely known as Business Innovation and Skills (BIS) under the Education (Student Loans) (Repayment) Regulations 2009.

Income-contingent repayment loans were introduced in 1998 and replaced the earlier system of fixed-term repayment loans which were repaid directly to the students Loans Company. The first income-contingent repayments began in 2000-01 but old style loans will continue to be repaid for a number of years - see CSLM2010 for more information about the different types of student loans. These loans are known as Plan 1 loans

A new type of repayment loan was introduced in 2013. These loans are known as Plan 2 loans. Plan 2 loans operate in the same way as Plan 1 loans although the amount that can be borrowed is higher and the threshold at which repayment starts is also a higher threshold.

From April 2019, DfE introduced a new loan for England and Wales known as Postgraduate Loan (PGL). PGL has a different threshold and rate. PGL can be repaid at the same time as plan, 1, or 2 or 4.

From 6 April 2021 The Scottish Government introduced a new plan for Scottish student loan borrowers known as Plan 4. This change will impact employers across the UK, not only those located in Scotland. The employer will be sent an SL1 to either switch from plan 1 to plan 4 or to start taking under Plan 4 if they haven’t already done so. These loans will be operated the same way as Plan 1 and 2 loan types

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UK resident borrowers of income-contingent repayment loans mainly repay through

  • Deduction from earnings together with tax and NICs under Part IV of the regulations

Or

  • Self Assessment under Part III of the regulations

Borrowers are liable to make repayments for each pay period or year of assessment. The amount to be repaid depends on their income for the period.

They can, in addition, make repayments directly to the Student Loans Company at any time and in the final two years of repayment they can agree with the Students Loans Company to pay by direct debit instead.

Non-UK resident borrowers make Student and or Postgraduate Loan repayments directly to the Student Loans Company under Part V of the regulations. HMRC has no responsibility for these borrowers. A borrower must notify the Student Loans Company if they are resident outside the UK for a period exceeding 3 months.

The business area ‘SL repayments’ at CSLM16000 onwards - explains the general rules which apply to all borrowers. These rules include

  • What earnings are liable to student and or postgraduate loan deductions
  • The income threshold above which student and or postgraduate loan repayments are due
  • The amount of studentand or postgraduate loan repayments due for each period

This section of the Manual covers local office enquiry work concerning borrowers.