Student loans
Repayment of any student loans starts from the April after their course finishes. The amount of repayment made will depend on the employees student loan plan and their income.
The rates and thresholds of student loans are detailed below and an employee will only pay back based on the amount over this threshold, not based on how much was borrowed.
Studen Loan Plan | Used when the course started | Rate of repayment | Weekly threshold | Monthly threshold |
|---|---|---|---|---|
Plan 1 | Pre September 2012 | 9% | £423.36 | £1,834.58 |
Plan 2 | September 2012 - July 2023 | 9% | £524.90 | £2,274.58 |
Plan 4 | Scottish Borrowers (Repayments started from April 2021) | 9% | £531.92 | £2,305.00 |
Plan 5* | After August 2023 | 9% | £423.00 | £1,834.00 |
Postgraduate | 6% | £403.84 | £1,750.00 |
*new plan being introduced for any borrowers who are starting their course in August 2023 or after.
To provide a worked example, if an employee earns £2,500 gross in one month and is on Plan 2 repayment the calculation would be as follows.
£2,500 - £2,274.58 threshold = £225.42 earnings subject to student loan
£225.42 * 9% = £20 student loan repayment for the month
We will make these deductions on the payroll as soon as we are made aware of them either by HMRC sending us a student loan notification or by receiving a P45 or New Starter Checklist with the student loan shown on it.
Recovery of an undergraduate and postgraduate loan at the same time is permitted.
It is important to remember that if there is a gross contractual agreement between the employer and employee then the student loan will be deducted from the net pay. If there is a net contractual agreement between the employer and employee then the employee will receive the same net pay and the employer will receive increased costs as the student loan will be paid by the employer and in addition to this it will increase the gross salary which will then also increase the tax and NI costs as well.