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The procedure depends on the type of court order you have received.
Priority orders
If it is a priority order, i.e.
- a Deduction from Earnings Order (DEO),
- an Attachment of Earnings Order (AEO) for maintenance, or
- a Schedule 5 AEO for a fine, issued by a magistrates' court,
it takes precedence over the student loan deduction. The priority order is taken first, followed by as much of the student loan deduction as can be taken by treating it as if it were also an AEO.
Other than in the case of Schedule 5 AEOs, this is done by applying the protected earnings rate, as defined for the most recent DEO or AEO, to the student loan deduction. The procedure is as follows:
- Calculate the amount of the student loan deduction that would normally be deducted.
- Apply the priority order by reducing the employee's attachable (arrestable) earnings by the protected earnings rate and then deducting the amount defined in the priority order.
- If there are sufficient attachable earnings left, take the full student loan deduction. Otherwise, take as much as possible, but only a whole number of pounds.
Example: An employee's gross pay for a month is £;1665 and the attachable earnings are £;1275.66. The student loan deduction would normally be £;37. The AEO specifies a protected earnings rate of £;1000 and a normal deduction rate of £;250. After deducting the protected earnings and the normal deduction rate from the attachable earnings, the remainder is £;25.66. There is not enough left to take the full £;37 student loan deduction, so the maximum possible, £;25, is taken instead.
In the case of Schedule 5 AEOs, where the deduction is based on percentage tables and there is no protected earnings rate, the order is calculated and deducted first, then as much of the student loan deduction as can be made, again only as whole pounds. Unless the employee has more than one court order, there is unlikely to be a problem taking the full student loan deduction.
Orders with percentage or table deductions
Although deductions under Schedule 5 AEOs are calculated using percentage tables, this section does not apply to them (see above).
If an employee has a deduction due under
- a Council Tax AEO,
- an Income Support Deduction Notice, or
- any type of Scottish arrestment,
no student loan deductions are taken at all until the amount due under the order has been repaid in full. The reason for the different rule for these orders is that both they and student loan deductions are calculated as a percentage or proportion of the employee's earnings and, as a result, there is no mechanism to prevent most of the employee's earnings being taken.
Other orders
In the case of a non-priority order, i.e. an AEO in respect of a debt, the student loan deduction is taken first, followed by the AEO. However, the deduction under the AEO is applied against the full amount of the employee's attachable earnings, not the amount left after taking the student loan deduction.
- Example: An employee's gross pay for a month is £;1665 and the attachable earnings are £;1275.66. The student loan deduction of £;37 is deducted first. The AEO specifies a protected earnings rate of £;1000 and a normal deduction rate of £;250. The full £;250 AEO deduction can also be deducted because the £;1000 protected earnings is applied against the £;1275.66 attachable earnings, leaving £;275.66 available for the AEO deduction.
In the case of an Income Payments Order (IPO), issued by the courts in the event of bankruptcy, there are no defined priorities and the deductions for both the IPO and the student loan should be made. There should not be a conflict as the existence of the student loan deduction is taken into consideration in calculating the amount to be deducted under the IPO.
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