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Workers over-repaying student loan set for automatic refund

Paloma Kubiak
Written By:
Paloma Kubiak

The Student Loans Company is trialling automatic bank refunds to customers who have over-repaid their ‘debt’.

As part of the Student Loans Company (SLC) improvements to the repayment scheme, it is trialling automatic bank refunds to customers who have over-repaid their student loans.

It said those who haven’t opted in to the SLC direct debit scheme and have yet to respond to communications on how to claim their money back will be rolled into the trial.

Once bank details are validated, credits will show in statements as ‘SLC Receipts’.

Why can people over-repay their student loan?

It’s all to do with the way information from your employer is passed to HMRC and then reported back to SLC.

Loan repayments (on income-contingent repayments from 1998/99 onwards, currently 9% of everything earned above £18,935 a year for Plan 1, £25,725 a year for Plan 2) come out of your salary via PAYE if you’re employed or via a self-assessment tax return for the self-employed.

Historically, SLC received payment information from HMRC annually, after the end of the tax year, meaning there was a window where customers could overpay as there was a lag on the most up-to-date information being exchanged.

However, Since April 2019, HMRC and SLC have been sharing customer repayment data more frequently with SLC receiving loan repayment information as reported by employers on a weekly basis. For customers who are paid monthly, that means their repayment information is also received by SLC monthly.

Despite the improvements, there is still a chance customers could overpay due to automatic deductions being made from salaries, so it’s vital for anyone nearing the end of their loan to get in touch with the SLC to switch payments to direct debit.

‘We don’t want customers to over-repay in the first place’

Steven Darling, director of repayment and counter fraud, said: “While we’re always pleased to be able to refund customers, we do not want customers to over-repay in the first place. Repaying too much is avoidable because we ask customers to take control of the final stages of loan repayment and make the switch from repaying through their salary to direct debit. We want all of our customers to keep their details up-to-date so that we can let them know when it’s their time to put a direct debit in place and strongly urge customers to take this action.”

The government has also recently announced that a new online repayment service will go live in 2020, allowing graduates to see and manage more up-to-date information about their student loans.