‘Antiquated’ student loan system means 89,000 graduates are overpaying every year


A significant number of graduates are overpaying their student loans because the “antiquated” instalment collection system can’t recognise with exactness when their debt obligations are cleared.

A Freedom of Information request to Student Loans Company demonstrates that for 2015-16, the most recent figures accessible, 86,000 students overpaid, contrasted with 52,000 borrowers in 2009-10.

The average, excessive charge per graduate was £592 for the 2015-16 year.

Most graduate borrowers – paying little respect to the kind of student loans they took out – make repayments through salary reductions. Nonetheless, the Student Loan Company acquires data from HMRC once every year specifying how much every borrower has reimbursed that year. This implies that when a loan is cleared during that time, it goes unnoticed – and their salary deductions continue.

The figures acquired by bookkeeping firm RSM, demonstrate that borrowers repaid £51m in excess altogether in 2015-16, an 80pc increment on the 2009-10 data.

Graham Farquhar, at the bookkeeping firm, cautioned:

“There is a time lag, meaning thousands of people nearing the end of their repayments overpay unless they opt for payment by direct debit. If they do overpay, they can then face further hurdles and delays in getting refunds.”

He added: “With the advent of Real Time Information for tax purposes and other initiatives to make the system digital, it is surprising that HMRC and the Student Loan Company have not yet developed a more efficient system which takes the right amount of money at the right time.”

Those students who loaned and who overpay usually need to “jump through hoops and face a lengthy wait to receive their refund”, included Mr Farquhar.

Employers deduct student loan instalments and report deductions to HMRC. They are lawfully obliged to keep making the deductions from their pay until told to stop by HMRC.

Student loans have changed throughout the years. Under the system that has been used since 2012, reimbursements are made when graduates acquire more than £21,000. Interests rates differ as per the borrower’s income and to the overall rate of inflation as measured by RPI.