Repayment of Teachers' Loans Scheme
This information provides a general awareness of the Repayment of Teachers' Loans Scheme for both teachers and their employer or school.
Although the Scheme is closed to new applicants, a significant number of employers and teachers will continue to be affected for anything up to ten years.
Background
The Department for Education and Skills ran this Scheme as a pilot from 1 July 2002 to 30 June 2005 to encourage teachers to take up posts in shortage subjects. (It applied to England and Wales only).
Teachers had to take up eligible posts by 30 June 2005 and apply to have their Student Loan included in the Scheme by 30 November 2005 at the latest. The Scheme has now closed to new applicants.
The Scheme offered eligible teachers exemption from repaying their Student Loan for as long as they remain in the eligible employment. If they are still in an eligible employment after ten years, the Student Loan is written off completely.
Eligibility for the Repayment of Teachers' Loans Scheme
The scheme applies to teachers in schools and to teachers in further education establishments, who are employed wholly or mainly to teach one or more of the following specified shortage subjects:
- Construction
- Design and Technology
- Engineering
- English (including Drama)
- Information and Communications Technology
- Maths
- Modern Languages (including Welsh)
- Science
- Basic Skills (literacy, numeracy or English as a second language) applies to teachers who started their first teaching post on or after 1 September 2003.
The teacher must be employed in the school, college or institution on a permanent or fixed-term contract for a minimum period of one term. There must be a contract of services, which can be full-time or part-time.
Eligibility for teachers in schools
The teacher must be employed in a teaching post in a maintained school, a non-maintained special school, a City Technology College, a City College for the Technology of the Arts or a City Academy in England or Wales.
The teacher must have qualified after 1 February 2002 and have gone straight into a teaching post within seven months of obtaining qualification (subject to a 12 month extension in the case of maternity absence).
Eligibility for teachers in further education establishments
The teacher must be employed in a teaching post in a further education sector institution or a special learning needs establishment in receipt of funding from either the Learning and Skills Council for England or the National Council for Education and Training for Wales, or a further education teaching post in a Higher Education Institution providing further education, in England or Wales.
The teacher must have obtained the appropriate further education teaching qualification after 1 February 2002 and have gone straight into a teaching post within seven months of obtaining qualification (subject to the maternity concession).
Continuing eligibility for the Repayment of Teachers' Loans Scheme
The scheme has the flexibility to deal with changes in teachers' circumstances during the ten years that they might be in the scheme. There is provision for taking account of a teacher needing time out for having or caring for children, long-term sickness, promotion, moving to a different school or college, or leaving teaching for a period or permanently. Any such changes should be notified to the Student Loans Company so that appropriate adjustments to repayments can be made. In cases other than childcare, the breaks are limited to a maximum of three, but any one break in excess of 365 days would be ineligible.
How the Repayment of Teachers' Loans Scheme works
The application and administrative process
It is the Student Loans Company not HM Revenue & Customs (HMRC) who considers eligibility. Application forms are available to the teacher from the Student Loans Company. The form is designed to test the teacher's eligibility for the scheme. Once the teacher has completed the form, it is handed to the head teacher or principal for verification, and then returned to the Student Loans Company who will check it and inform the teacher whether they are eligible for the scheme.
Each September, the Student Loans Company will write to the teacher to confirm their details from the previous academic year and seek confirmation of their current circumstances and future intentions. The Student Loans Company can then work out the appropriate amounts of repayment.
Amounts repayable
Where a full-time teacher has an income contingent Student Loan, the amount outstanding at the point of entry to the scheme, plus interest, will be written off in annual instalments over a period of up to ten years so long as the teacher remains in an eligible post. During that period, no repayments will be collected on any income earned from the eligible teaching post.
Part-time teachers will get their loans written off pro-rata to the FTE (Full Time Equivalent) hours they work.
Operating the Repayment of Teachers' Loans Scheme
Under the main Income Contingent Repayment Scheme, employers make Student Loan deductions from salary along with PAYE tax and National Insurance Contributions. The Income Contingent Repayment Scheme involves employers starting to make deductions on receipt of a Start Notice (SL1, manual Start Notice, P45 or, from April 2006, P46 with Student Loans Statement D ticked). Student Loan deductions stop when the employer receives a Stop Notice (SL2) from HMRC for the employee.
The following procedures apply for full-time employees who are accepted onto the Repayment of Teachers' Loans Scheme:
- If an employer is making Student Loan deductions, HMRC sends a Stop Notice (SL2)
- If the teacher leaves the employment, and the employer has received a Stop Notice, the employer does not enter a 'Y' in the Continue Student Loan Deductions box on the P45
- If the teacher moves to a non-eligible post and still has a loan outstanding, HMRC will send a Start Notice (SL1) to the new employer.
A different procedure applies when an employee who is employed part-time is accepted onto the Repayment of Teachers' Loans Scheme. The Student Loans Company gives the employee a letter for the employer asking him or her to suspend making deductions. This is not a Stop Notice and the employer records will continue to reflect the teacher as a student loan borrower. When the employee leaves the eligible part-time post the employer will complete form P45 to show a 'Y' in the Continue Student Loan Deductions box of the P45.
The borrower has to apply for eligibility to remain in the Repayment of Teachers' Loans Scheme each time he or she moves to a new part-time job. If the new part-time job is an eligible employment, the employer is given a letter from the Student Loans Company by the employee to suspend Student Loan deductions whilst he or she remains in that employment.
General points about the Repayment of Teachers' Loans Scheme
Tax and National Insurance
The loan amount written off each year is taxable but the Government will meet the tax and National Insurance costs on the teacher's behalf so that the teacher will get the full value of the write-off.
Frequently Asked Questions (FAQs) for non standard situations
Q. What should you do if you've never employed the person you receive a suspend instruction for?
A. This should never happen because the letter the Student Loans Company issues to ask the employer to suspend Student Loan deductions is issued to the employee who in turn must provide it to their employer for the payroll department.
Q. What should you do if the person you receive a suspend instruction for used to work for you, but has left?
A. You should already have completed a P45 with a 'Y' in the Continue Student Loan Deductions box if you were deducting Student Loan deductions for that employee whilst they worked for you. No action is required if the employee is no longer working for you when a suspend notice is received.
Q. The employee is not a Student Loan borrower, although he/she works for me and I receive a suspend notice.
A. No action required. Ask your employee to contact the Student Loans Company to find out why they have been given a suspend notice for you if they are not a Student Loan borrower.
Q. What do you do if the person does work for you but the details don't match those on the instruction?
A. Ask the employee to contact the Student Loans Company to explain why they have issued them with a suspend instruction containing incorrect details.
Q. What if I have not received a Stop Notice or suspend notice for an employee who says that they have been accepted for the Repayment of Teachers' Loans Scheme?
A. Continue making deductions. Ask the employee to contact the Student Loans Company to explain why a Stop Notice or suspend notice has not been issued.
