RSM has welcomed news that Philip Hammond will announce measures in the Budget to ensure graduates are not forced to over-repay their student loans via the payroll.
Audit, tax and consulting firm RSM has campaigned on this issue for several years, highlighting the unfairness in the system which results in tens of thousands of graduates having to continue repayments on student loans that have already been cleared.
RSM recently publicised a response to a freedom of information request which revealed that 86,000 graduates overpaid by an average of £592 each in 2015-16.
The figures show that borrowers over-repaid almost £51m on income contingent repayment (ICR) student loans through their salary deductions in 2015/16. This means that the amount over repaid by graduates since 2009/10 has increased by 80 per cent from £28.2m in that 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.
‘We have been banging the drum about the unfairness in the student loan repayment system for many years.
‘We have been particularly concerned that, while employers and employees are required to comply with their tax obligations promptly, the necessary exchange of information between the Student Loans Company and HMRC has proceeded slowly, sometimes leading to delays of 19 months, as a result of which massive over-repayments have been made by graduates.
‘We have recently witnessed the rather unseemly spectacle of HMRC and the Student Loans Company publicly pointing the finger of blame at each other. We are delighted that there now appears to be the political will to knock heads together to ensure graduates are given a fair deal.’