The Repayment of Student Loans (Scotland) Regulations 2000

Explanatory Note

(This note is not part of the Regulations)

These Regulations deal with the repayment of student loans by Scottish domiciled students who started higher education courses in August 1998 or later. Students who began their courses before then, and certain students who began their courses after then (for example gap-year students), remain subject to the previous system of mortgage-style loans for maintenance under the Education (Student Loans) Act 1990 (1990 c. 6).

Repayments will be collected in three main ways:

(a) by the Inland Revenue through self assessment (Part III of the Education (Student Loans) (Repayment) Regulations 2000 (S.I. 2000/944)) (the “Collection Regulations”);

(b) by the Inland Revenue via employers' deductions through the PAYE system (Part IV of the Collection Regulations);

(c) by the Scottish Ministers, where borrowers are living and working abroad (Part III of these Regulations.

Collection by the Inland Revenue is triggered by a determination made by the Scottish Ministers in terms of regulation 3(2) of the Collection Regulations. Borrowers may also make voluntary repayments to Scottish Ministers at any time.

Part I of these Regulations contains introductory provisions and revokes current provision in the Education (Student Loans) (Scotland) Regulations 1999 (S.I. 1999/1001) dealing with repayment.

Part II S

In the event that Scottish Ministers decide that the Inland Revenue should not collect repayments under Parts III and IV of the Collection Regulations, or in cases where the borrower’s loan does not exceed £120, borrowers may be asked to make repayments directly to the Scottish Ministers (regulation 5).

On receipt of payment towards the outstanding loan, Scottish Ministers will firstly apply the repayment to reduce any outstanding interest and secondly the outstanding principal loan (regulation 6).

Borrowers may repay their loans before they are required to do so if they wish. Borrowers are not required to make repayments until the 6th April after they have completed or left their courses. Borrowers who have a loan for a Postgraduate Certificate of Education can notify Scottish Ministers that they do not wish to repay the loan at the same time as one made under the mortgage-style repayment system and repayments will be deferred until repayment of the mortgage-style loan is completed (regulation 7).

Provided that a borrower has met all his student loan repayment obligations, loans are to be cancelled when the borrower reaches the age of 65, or dies, or if he becomes disabled and because of his disability is permanently unfit for work. Liability to make loan repayments ceases on the date of cancellation. For borrowers in self-assessment who die, loan repayments are collected through annual tax returns, including that for the year in which the borrower dies. For those in self-assessment whose loans are cancelled at age 65 or due to permanent disability, liability to make loan repayments ceases at the tax year in which the loan is cancelled. For borrowers making repayment via their employers, the liability to make repayments ceases on the date of cancellation (regulation 8).

If a borrower makes any repayments which exceed the total outstanding balance on his loan, Scottish Ministers must refund the overpayment together with interest. Interest is to be paid from the date of receipt of the overpayment at the same rate that it is charged to loan accounts. Where an amount is received through self-assessment to tax which exceeds the total amount outstanding, the overpayment is to be refunded to the Inland Revenue and the borrower’s liability to the Inland Revenue reduced accordingly. Where a borrower has made repayments through his employer in a particular tax year and his income is less than £10,000, he may apply to Scottish Ministers to have those repayments refunded. These types of refund do not attract interest. Repayments made directly to Scottish Ministers will be taken to be received on the date of receipt. Repayments made directly to the Inland Revenue through the self-assessment tax system will be taken to be received on 31st January in the financial year following the financial year to which the repayment relates. Repayments made via employers will be taken to be received in monthly instalments received on the last day of each month in a year to which the repayment relates (regulation 9).

Part III of these Regulations deals with borrowers who are not resident in the UK for income tax purposes. Borrowers must tell Scottish Ministers if they are resident overseas for more than three months. They must, on request, provide information about their residence overseas, such as the purpose of their stay and their employment. If a borrower fails to provide Scottish Ministers with required information, they may require the borrower to repay immediately that part of the loan that would have been repaid had the information been provided and may apply a rate of interest to the loan at three times the normal rate of interest until the information is provided (regulations 11 and 12).

A borrower who is outside the UK tax system because he is living abroad must make repayments directly to Scottish Ministers and will receive a notification from them to that effect. Repayments will be due at the rate of £246 a month (based on 9% of income over £10,000 at the assumed rate of twice UK national average earnings measured in months each year). However, a borrower may apply to pay a lower monthly instalment equal to 1/12 of 9% of his annual income over £10,000. If a borrower misses one or morerepayments, Scottish Ministers may require him to repay the total outstanding loan balance immediately (regulation 13).

Provision is made for a borrower who ceases to be resident abroad to be no longer required to make repayments directly to Scottish Ministers (regulation 14).