Antiquated collection system behind 10 per cent rise in student loan over-repayment

New figures from the Student Loans Company show that there has been a 10 per cent year-on-year rise in student loan over-repayments, leaving more than 70,000 borrowers out of pocket by an average of £580. The figures, obtained under a Freedom of Information request by Baker Tilly, show that borrowers over-repaid more than £45.4m on income contingent repayment (ICR) student loans through their salary deductions in 2013-14, a 10 per cent rise over the £41.4m recorded in the previous year. ICR student loan repayments are collected through the UK tax system where borrowers remain in the UK.

However, as the Student Loan Company only receives information from HMRC about what customers have repaid once a year, after employers have finalised their annual tax returns, 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 their over-repayments refunded. In total, more than 78,800 people made over-repayments on their student loans in 2013-14 by an average of £580 each. The number of people making over-repayments has risen steadily since 2009-10 when 52,600 people over-repaid via their employer payroll.

Lesley Fidler, Baker Tilly Employer Solutions Associate Director said:

'In this day and age it beggars belief that HMRC and the Student Loan Company can’t develop a more efficient system which takes the right amount of money at the right time from people wanting to repay their student loans. For some people, monthly student loan deductions are a significant proportion of their income, and these overpayments could be causing real financial hardship. What’s particularly galling is that employers are required under threat of penalties to report to HMRC in real time but there is no corresponding duty on HMRC to report each repayment to the Student Loans Company. In fact, they only have to report and pay once a year – once the tax year has ended. These double standards mean some borrowers have to jump through numerous hoops or face a lengthy wait to receive their refund. These latest figures show that the problem is getting worse rather than better. We know that the Student Loans Company is currently working with HMRC to explore opportunities to make better use of data received from employers in real-time but they need to get a move on to bring the current antiquated and inefficient system into the 21st century.'

The Student Loans Company (SLC) provides the following advice:

  • borrowers are encouraged to monitor their student loan account via the student loan repayment portal at;
  • to prevent overpayment, borrowers who are within two years of completing their loan repayments can switch to repaying by Direct Debit to avoid over-repaying;
  • in circumstances where borrowers do not switch to the Direct Debit scheme, they can contact SLC if they believe that they have over-repaid through PAYE. Borrowers will be required to send in copies of their payslips or P60 to confirm the amount of student loan deductions made during the relevant tax year and a refund of the over-repaid amount plus interest will be made; and
  • where borrowers do not contact SLC, once customers’ accounts have been updated with student loan repayment information, the SLC will contact those customers who have over-repaid their student loans to notify them of the refund process.