Student loan for tuition fee affecting UC entitlement

cmbrookes

Hello
I am having an absolute nightmare with UC at the moment. I am now paying back my student loan which is deducted before tax and NI. My student loan was for tuition fees only as I studied distance learning with The Open University. The problem I am having is with my net earnings, UC are saying my employer has reported is different (higher) then my actual net earnings on my payslip. The difference between the two is the student loan. So what is happening my UC is being calculated based on my net pay with the student loan added back on. According to the government website (https://www.gov.uk/guidance/universal-credit-and-students) a student loan taken for tuition fees will be excluded when calculating UC, only for maintenance will it be taken into consideration hence affecting the UC entitlement. My case manager on my online journal has said that they can't do anything because it is a third party deduction, but if this is the case then why does it state on their website that this type of student loan will not affect UC. My employer have told me in writing they have 100% reported the net earnings shown as on my payslip, they can't amend anything and HMRC have said all they do is pass the earnings to UC given by my employer. This has been going on for weeks now and it has affected two UC payments. I am in a never ending circle and I just do not seem to be getting anywhere with my case manager at UC. I have requested a mandatory reconsideration but I am not very hopeful of this due to previous experience with UC. My case manager has also said she doesn't think it will be resolved because a student loan is a third party deduction but again the question begs, why does it state on their website that a tuition fee student loan will be excluded when calculating UC? I really am at my wits end with this and do not know where else to go.
Regards
Chris

NedS

cmbrookes said:

Hello
I am having an absolute nightmare with UC at the moment. I am now paying back my student loan which is deducted before tax and NI. My student loan was for tuition fees only as I studied distance learning with The Open University. The problem I am having is with my net earnings, UC are saying my employer has reported is different (higher) then my actual net earnings on my payslip. The difference between the two is the student loan. So what is happening my UC is being calculated based on my net pay with the student loan added back on. According to the government website (https://www.gov.uk/guidance/universal-credit-and-students) a student loan taken for tuition fees will be excluded when calculating UC, only for maintenance will it be taken into consideration hence affecting the UC entitlement.

What they are doing is correct.

The bit about the loan for tuition fees being disregarded is for when you are in receipt of the loan and claiming UC - they will not deduct the loan from your UC during the time you are a student and receiving the loan as it is not for living costs, it's for tuition.

But once you've had the load, finished the course and are repaying it, it's a debt exactly the same as a mortgage or a car loan (or any other loan), and you are responsible for repaying it out of your income. The only confusing issue here is it's actually deducted directly from your pay packet rather than you repaying it out of your net take home pay.

To make things simpler to understand, view it this way. Say you earn £1000/month take home (net) and have to repay £100/month on your loan, UC treats you as having received £1000 and then you repay your loan, pay your rent, buy your food out of that £1000. Except in this case the £100 for the loan is deducted at source before you receive your £1000, hence you only see £900, but you have earned £1000 and that's what UC will use as your income.

Bit of a rambling explanation, but does that make sense?

sammyjammy

The earnings rules for UC is that they take into account earnings net of Tax, NI, pension, student loan is not included in this and therefore your net income for UC is your take home plus whatever you repaid in student loan payments.
Where you refer to a student loan for tuition isn't taken into account this means when you receive the loan not when you are repaying it.
The 63% taper is applied to earnings after deducting income tax, national insurance and 
pension contributions, as well as other allowable deductions e.g. allowable expenses. 
Repayments of a student loan are not deducted from earnings before the taper is applied. 
 
Full detail can be found in The Universal Credit Regulations 2013, Regulation 55 (extract 
included below). 
 
Employed earnings 
55.—(1) This regulation applies for the purposes of calculating earned income from employment 
under a contract of service or in an office, including elective office (“employed earnings”). 
(2) Employed earnings comprise any amounts that are general earnings, as defined in section 
7(3) of ITEPA, but excluding— 
(a) amounts that are treated as earnings under Chapters 2 to 11 of Part 3 of ITEPA (the 
benefits code); and 
(b) amounts that are exempt from income tax under Part 4 of ITEPA. 
(3) In the calculation of employed earnings the following are to be disregarded— 
(a) expenses that are allowed to be deducted under Chapter 2 of Part 5 of ITEPA; and 
(b) expenses arising from participation as a service user (see regulation 53(2)). 
(4) The following benefits are to be treated as employed earnings— 
(a) statutory sick pay; 
(b) statutory maternity pay; 
(c) ordinary statutory paternity pay; 
(d) additional statutory paternity pay; and 
(e) statutory adoption pay. 
(5) In calculating the amount of a person’s employed earnings in respect of an assessment 

---

period, there are to be deducted from the amount of general earnings or benefits specified in 
paragraphs (2) to (4)— 
(a) any relievable pension contributions made by the person in that period; 
(b) any amounts paid by the person in that period in respect of the employment by way of 
income tax or primary Class 1 contributions under section 6(1) of the Contributions 
and Benefits Act; and 
(c) any sums withheld as donations to an approved scheme under Part 12 of ITEPA 
(payroll giving) by a person required to make deductions or repayments of income tax 
under the PAYE Regulations. 
 

cmbrookes

Yes I understand that and if that's the case then I accept that, not that I have a choice but the government website needs to be more clearer that loan being disregarded is only while you are still studying and not when you have completed the course. 

Regards

Chris

tomtom256

The guidance is clear, universal credit and students.

You have completed the course and are no longer a student, so that section would not apply to you.

cmbrookes

tomtom256 said:

The guidance is clear, universal credit and students.

You have completed the course and are no longer a student, so that section would not apply to you.

Well I didn't find it clear hence why I asked the question in here. That is what this forum is for, to help people. You don't have to tell me the guidance is clear, I find it quite arrogant and don't appreciate it. 
Thank you to all comments previously for helping me.