78,800 graduates over-repaid on student loans in 2013-14, Halimah Manan reports.
Nearly 80,000 university graduates repaid more in student loans than they owed, in 2013-14, reported accounting firm Baker Tilly on July 30th.
Statistics from the Student Loans Company (SLC), obtained under a Freedom of Information (FoI) request, revealed that 78,800 university graduates over-repaid on their loans. Each graduate over-repaid by an average of £580.
Have you repaid too much of your student loan?
The repayments, taken automatically through monthly Pay As You Earn (PAYE) salary deductions, amount to £45.4m altogether for 2013-14. This marks a ten percent increase on the £41.4m recorded in 2012-13. Borrowers only begin repaying once they earn over £17,335 or £21,000 dependent on when they started university.
HM Revenue and Customs (HMRC) collects repayments from employers and sends details to SLC once a year. Once repayments are complete, they issue “stop notifications” to employers.
However, HMRC do not have access to outstanding loan balances, a spokesperson told Kettle over email. This, Baker Tilly said, results in a “time lag.”
Nicola Watson, SLC spokesperson, told Kettle over email, “SLC introduced a process to assist customers to avoid over-repayments initially in 2010”, when asked how SLC are addressing the problem.
She said: “SLC advise the customer of their eligibility” to opt to pay by direct debit, if they are within the final 23 months of repayment, “in an attempt to prevent” this “lag”.
Though, she added, SLC “acknowledge further improvements can be made and SLC continues to work with BIS [Department for Business Innovation & Skills] and HMRC to continuously improve the service we provide.”
— Baker Tilly UK (@BakerTilly) July 31, 2015
Calling this system “antiquated,” Lesley Fidler, Baker Tilly employer solutions associate director, criticised HMRC for having “double standards.” While employers must report to HMRC in real time or be penalised, HMRC only reports payments to SLC after annual tax returns.
Even so, those who have over-repaid are entitled to refunds on their payments with interest. In this case, they will “be contacted automatically,” HMRC told Kettle.
However, Baker Tilly said, graduates who over-repaid “can then face further hurdles and delays in getting their over-repayments refunded.”
“For some people, monthly student loan deductions are a significant proportion of their income, and these overpayments could be causing real financial hardship,” Fidler added.
Watson told Kettle: “Customers’ annual income can also fluctuate throughout the year resulting in their balance being paid off quicker than expected.”
A graduate’s experience
Erin Thomson, a graduate from Durham University in 2006, overpaid by nearly £550 in 2014-15 and £350 in 2015-16. “I received a letter from SLC in early July notifying me that I was due a refund … including the phone number to call to claim said refund.” She said, “I called the number … and I had the money back in about a week and a half.”
In order to retrieve the £350 overpaid in 2015-16, she said, “I can either wait until next July … or the customer services rep I spoke to when sorting my previous refund gave me the process to reclaim it now … [which] involves sending them copies of this year’s payslips along with a letter saying I want my money back.”
The process “according to the rep,” Thomson told Kettle, “will take around a month from when they receive the demand to the money being in my account.”
When asked about the refund process, Watson said there are two processes; SLC “write to the customer to advise and to arrange a refund” after notification of repayments from HMRC, or the customer can advise the SLC that they have overpaid.
In this case, the customer is asked to send evidence showing their repayment deductions. “We then contact HMRC to request that the employer be informed to cease deductions and a refund of the over-repaid amount plus interest will be made via a BACS transfer.”
This transfer, on average, takes three working days to process.
Describing her experience, Ms Thomson added, “it’s a bit of an annoyance to have to do it, but in a way it’s ‘extra’ money in my pocket now, as the repayments have been coming out since I started working full time so I wasn’t missing the full amount.
“So far I haven’t faced any difficulties in reclaiming my money, and the rep I spoke to on the phone couldn’t have been more friendly and helpful.”
Watson and a spokesperson for HMRC said they are currently working together to “make better use of the data received from employers in real-time.” The HMRC spokesperson added that HMRC and SLC are exploring ways to ensure fewer borrowers overpay.
SLC advise that customers switch their repayments to Direct Debit when they are within two years of paying off their loan. This can be done by logging on to www.studentloanrepayment.co.uk.
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