This four-part blog series is intended to help MSPs and their staff with queries they receive on student support eligibility and entitlements. It covers support for college and university students at all course levels, signposting readers to further relevant information.
This blog looks at student eligibility for benefits and repayment of student loans.
Other blogs in the series cover:
- Eligibility and applying for funding
- Support for Further Education (FE) students
- Support for Higher Education (HE) students.
Students and benefits
While most full-time students can’t claim benefits, the following may be eligible:
- young students in FE courses who are living away from their parents.
- students who are parents.
- students with a disability.
It is important to note that any loan or bursary support a student receives may reduce the amount of money they can claim for social security benefits they are eligible for:
- Universal Credit and the benefits it replaced (Child Tax Credit, Working Tax Credit, Income Support, income-based Jobseekers Allowance, income-related Employment and Support Allowance, and Housing Benefit) are means tested and affected by student funding.
- Non-means tested benefits include: contribution-based Jobseeker’s Allowance, contribution-based Employment and Support Allowance, Adult disability payment, Carer support payment, and Child Benefit.
The Child Poverty Action Group’s Benefits for Students in Scotland Handbook contains further details of student eligibility for benefits and tax credits.
Student loan repayment
Student loan repayment conditions are set out in the Repayment of Student Loans (Scotland) Regulations 2000 (the 2000 Regulations) and the UK Education (Student Loans) (Repayment) Regulations 2009 (the 2009 Regulations), as amended.
The Student Loans Company (SLC) makes loan payments and works out repayment arrangements for borrowers.
Further information about student loan repayment is available on the mygov.scot website.
Repayment threshold
Most borrowers repay their loans through repayments to HM Revenue and Customs (HMRC), either by employers taking amounts from pay or via the tax Self-Assessment process.
All Scottish students who started an undergraduate or postgraduate course on or after 1 September 1998 are on repayment Plan 4. The meaning of ‘Plan 4 loan’ is contained in the 2009 Regulations. It allows for Scottish Ministers to determine collection of repayments of loans paid under Scottish regulations.
Borrowers only begin to repay student loans once they earn over a certain amount. This is known as the ‘repayment threshold’. The 2000 Regulations define ‘repayment threshold’. This rises annually and is currently set at £33,795.
If a borrower’s salary drops below the salary threshold, repayments are stopped and only restart once earnings go over the threshold once again.
Interest rates
Student loan interest is charged from the day a borrower is paid their first instalment until it is repaid in full or cancelled
The Student Support (Scotland) Regulations 2022 set out how loan interest is calculated. Interest is applied at a rate of Retail Price Index or the Bank of England base rate plus 1%, whichever is lower. Currently the interest rate for Plan 4 is 3.2%. The interest rate is determined on 1 September each year.
Cancellation of loan
Regulation 8 (4) of the 2000 Regulations sets out criteria for cancellation of loan. It states that Scottish Ministers can cancel a borrower’s liability to repay where:
- the borrower dies
- the borrower receives a disability related benefit and because of that borrower’s disability is permanently unfit for work
- the 30th anniversary of a borrower becoming liable to repay the student loan
- the borrower’s 65th birthday.
By Lynne Currie, Senior Researcher (Further and Higher Education), SPICe