Government holds £28 million in excess student loan repayments

Tom Hardwick reports as research shows that £28m in unnecessary student loan repayments remains in government hands.

Tom Hardwick
18th February 2020
Recently released data indicates that the government is holding more than £28 million in loan overpayments made by UK students over a nine-year period. 

Over 500,000 students inadvertently continued to make payments to the Student Loans Company (SLC) despite their debts being cleared, which totalled to a surplus of almost £308 million. On average each student affected had overpaid by £597, and despite much of this being refunded, there are many who have yet to claim their share of the £28 million still in government hands. 

The publication of this data by Research Professional News has highlighted flaws in the SLC’s repayment system. The SLC would gather repayment information annually, with this occurring at the end of the tax year in April. The sporadic nature of these checks resulted in many graduates, who may have cleared their debt earlier in the year, continuing to make unnecessary repayments until April. By the time the SLC were aware that debts had been cleared months prior to their annual check, some had overpaid by hundreds of pounds.

A spokesperson for the SLC has responded, highlighting that they have made progress in reducing the amount of overpayments. Greater integration has enabled HMRC and the SLC to share data weekly as opposed to annually, a move designed to “help to prevent customers from over-repaying and provide them with more up to date information about their loan repayments.” 

There were also efforts to reassure any graduates worried that they too may have overpaid. The SLC spokesperson reminded those concerned that “we proactively contact all customers who have over-paid to make arrangements for a refund.” However, this process of refunding has been hampered by the outdated contact information tied to some SLC accounts. Graduates who had set up accounts using old emails and phone numbers may not have received details of their excess payments, making it difficult for the SLC to proceed with refunds in every case. 

Although the SLC have implemented changes to to reduce the risk of overpayments, there are still questions concerning the automatic loan repayment system. Currently, payments are made automatically through the tax system once a graduate earns over the threshold of £25,725 per annum (according to a plan 2 loan for post-2012 students). This system is supposed to ensure that repayments are made with ease, but the SLC’s failure to process payments correctly has financially affected half a million graduates. In spite of the criticism they have received, the SLC has reiterated their commitment to ensuring that all graduates make the correct repayments, with their spokesperson stressing that “we want all customers to repay the right amount and not to over-repay.” 

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