Graduates overpaid £36m in student loan payments in one year
Poor communication between HMRC and the Student Loans Company mean thousands of graduates end up overpaying on their student loans.
Using figures from a freedom of information request, investment platform AJ Bell calculated that in 2017/18, graduates paid off £36,359,200 more than they actually owed, due to the lack of joined up systems between HMRC and the Student Loans Company. The average graduate paid off £534 too much.
Why are graduates overpaying?
The overpayment issue arises because HMRC collects student loan payment information monthly, when people pay off their loan through their paycheque, but only inform the Student Loans Company once a year how much each individual has paid off.
What exacerbates the problem is that it can take six months or more from the end of the tax year for HMRC to tell Student Loans Company of the repayment amount – meaning individuals can continue paying towards their loan for up to 18 months after the debt has been cleared.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “Once again we’ve seen the scale of the overpayments are truly staggering, with hundreds of people overpaying by £5,000 or more in a year, while almost 10,000 graduates are owed £1,000 or more. As well as taking away money that is rightfully theirs, the repayments affect graduates’ ability to get mortgage approvals, save for a house deposit or start saving for their futures.”
“The system between Student Loans Company and HMRC was reformed in April this year after pressure from MPs and the media. It means the repayment information is now shared weekly, which should hopefully consign this problem to the history books. However, while repayment information from April this year will be up-to-date, Student Loans Company still needs to tally and process the information for 2018-19, meaning that graduates may still be overpaying.”
What to do if you have overpaid
Anyone who thinks they might pay off their student loan soon should contact Student Loans Company to get an up-to-date figure on their loan amount and check they aren’t overpaying.
If you discover that you’ve paid off more than you actually owe you should also contact Student Loans Company to arrange a refund as soon as possible.