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Student loan borrowers occasionally over-repay their student loan as the loan term nears its end because of the time delay between employers making deductions from salary each month and submitting an annual return with detail of repayments.
In December 2009, the Student Loans Company (SLC) introduced a new initiative to help PAYE borrowers avoid this.
Under this scheme, in the last 23 months of repayment PAYE student loan borrowers can opt out of PAYE student loan deductions and go on to a direct debit arrangement.
The SLC will try to contact borrowers shortly before this time to offer and arrange this option. The advantages of the direct debit arrangement are:
- the borrower will not over repay, and
- he can agree monthly repayment dates with the SLC.
If a borrower opts for this arrangement, HMRC will issue an SL2 Stop Notice to the employer who can then stop making deductions in the normal way.
