We are taking student loan deductions from the earnings of one of our employees, but we have just received a court order for the same employee. How do we handle this?

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), or
  
  
• an Attachment of Earnings Order (AEO) for maintenance or a fine (but not a Schedule 5 AEO 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.

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:

1. Calculate the amount of the student loan deduction that would normally be deducted.
   
   
2. 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 order.
   
   
3. 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 £;1250 and the attachable earnings are £;992.40. The student loan deduction would normally be £;37. The AEO specifies a protected earnings rate of £;820 and a normal deduction rate of £;150. After deducting the protected earnings and the normal deduction rate from the attachable earnings, the remainder is £;22.40. There is not enough left to take the full £;37 student loan deduction, so the maximum possible, £;22, is taken instead.

Orders with percentage or table deductions
If an employee has a deduction due under

• a Council Tax AEO
• a Schedule 5 AEO issued by a magistrates' court
• 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.

Non-priority orders
The only other type of order is the non-priority order, i.e. an AEO in respect of a debt. In this case, 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: Using the same figures as the earlier example, but treating it as a non-priority order, the full £;37 student loan deduction is taken first. The full £;150 AEO deduction can also be deducted because the £;820 protected earnings is applied against the £;992.40 attachable earnings, leaving £;172.40 available for the AEO deduction.

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