If you had a UK student loan, you could be owed hundreds of pounds

The Student Loans Company has been taking millions of pounds from the bank accounts of thousands of graduates even though they have already paid off what they borrowed in full.

It should be more of a scandal than it is. The issue has been known about for some time, and while the SLC has been taking steps to improve the situation, it is still allowing its customers to over-pay millions of pounds each year.

It wouldn't be so bad if the overpayments were quickly returned to the former students in question. After all, if a shopkeeper gives you change for ￡10 even though you paid with a ￡20 note, it is no big deal if they quickly correct their error. The problem is, that is not what is happening with student loans.

For example, according to data I obtained under the Freedom of Information act, just under 60,000 England-domiciled graduates and other students overpaid in the last five years alone. They are owed a total of ￡18.4m, which equates to more than ￡300 owed to each person. A full analysis is available to read here.

This is just the tip of the iceberg too, since it only dates back to 2015-16. Thousands more graduates will have overpaid in earlier years too.

As you can see from the breakdown above, the SLC has gradually reduced the amount of money it is taking from each student who is owed a refund. Those graduates who overpaid in 2015-16 are owed a whopping ￡671 on average each, whereas those who overpaid in 2019-20 are owed an average of ￡78.

It is important not to trivialise this though. Would you be happy if you found out an organisation had removed ￡80 from your bank account without you knowing? It is a big deal and, while the improvement in the amounts being taken is welcome, more needs to be done. It is doubly frustrating when you consider the burden that a student loan can place on an individual—sometimes for decades. To take more than is owed by them is unacceptable.

Rachel Hewitt, director of policy and advocacy at the Higher Education Policy Institute think-tank, said it was “critical to the operation of, and trust in, the student loan system that the system works as it is meant to”.

“It is unethical for the loan recipients to have to take the responsibility for ensuring they are not overpaying, and shows flaws in the system, that there is still such a significant number of graduates overpaying,” she added. “It is essential that this is addressed, to avoid further distrust in the loans system.”

In response

Responding to the investigation, a spokesperson for the SLC said that over the past two years, SLC has "introduced a new Online Repayment Service to make it easier for customers to manage their student loan and to help avoid over-repayment".

"These improvements have resulted in a 38 per cent drop in the amount over repaid since 2018," they added.  

 This is true and welcome, although it is worth noting that the SLC has still collected more than ￡5m in overpayments since 2018 despite the improvements.

"Customers can avoid over-repayment by opting to pay their student loan by Direct Debit during the last two years of repayment," the spokesperson added. "We contact every customer two years prior to the end of their loan and urge them to switch their repayments to Direct Debit during this period. 

"In addition, we now automatically refund customers and last year we automatically refunded ￡3.5m, but we can only do so if we hold up-to-date contact information."

Any customer who thinks they may have over-repaid should check their account balance on Gov.uk first and ensure that their contact details are up to date. If an over-repayment is showing they should update their account to receive an automatic refund or contact the SLC to request a refund.