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AIA

Student loan repayment Regulations revised

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17th May 2009
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The Regulations concerning the repayment of Student loans by borrowers who took out income contingent student loans for courses starting from September 1998 have been reissued as a consolidated Statutory Instrument (The Education (Student loans) (Repayment) Regulations 2009, SI 2009 No 0470). Those who advise borrowers about student loan repayments should be aware of the content.

The Regulations set out the provisions under which student loans are repaid, which include the collection of loan repayments by employers, payments made through the income tax Self assessment system, and payments made direct by the borrower by direct debit.

The latter of these arrangements is new, and allows borrowers within the last 23 months of the loan to change to payment by direct debit by equal instalments rather than through payments made by deduction from salary. This allows borrowers to minimise the risk of overpaying the loan through slow communication between HMRC, the lender and the borrower, which has in the past caused significant overpayments of student loans.

The new Regulations also set out the provisions for charging interest on student loans and what happens if the borrower is made bankrupt. The loan does not form part of the borrower’s estate for bankruptcy so remains due even after the insolvency.

Borrowers who live and work abroad will be required to make payment under the direct debit arrangements.

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