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


Threshold

Where the repayments are calculated on total income for the year, for example where the borrower is self employed, the annual threshold will be used.

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.

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