EIM21747 – Particular benefits: student loans: paid by employer or written off

Student loans

Employers may incentivise employees who have outstanding student loans, by undertaking to repay or write off all or part of the employee’s student loan.

Employer makes the loan repayment

An employer may undertake to repay an employee’s outstanding student loan. Typically the employer will arrange to meet the annual repayments due on the loan in order to incentivise the employee to remain in that employment.

If an employer pays the repayments due from the employee, this represents the meeting of the employee’s pecuniary liability, chargeable as earnings under Section 62 ITEPA2003. See EIM00580.

Employer writes off the loan

Where the employer provided the student loan and the same employer undertakes to write-off that loan in return for the employee remaining in that employment, the amount written off is chargeable to tax as earnings under Section 62. See EIM01490.

For example, a student who is provided by the government with a loan, later becomes a teacher. From September 2002 the Department for Education and Science (DfES) introduced a scheme under which it would write-off student loans due from employees who take up employment as teachers in certain shortage subjects. Usually DfES writes-off the loan in annual instalments to ensure that the teacher has an incentive to remain in that employment.