Graduates stung for £50 million they didn’t owe on student loans

Graduates have paid off £50 million in student loans that they didn’t owe in just one year
Laura Suter
9 July 2018
  • The average graduate overpaid by £581

  • The past seven years has seen a 75% increase in the amount overpaid

A total of 85,720 graduates paid off more than they owed in student loans in 2016-17, the latest data available, according to a Freedom of Information request from AJ Bell. In total HMRC and Student Loans Company took £49.78 million too much from graduates. The average person overpaid by £581.

Laura Suter, personal finance analyst at AJ Bell, comments:

“The fact that almost 86,000 graduates have collectively paid £50 million too much is staggering. There has also been a 75% increase in the amount overpaid in the past seven years, showing that the issue is not getting better.

“While the average graduate has overpaid £582, the scale of the overpayments by some individuals is particularly alarming, with 40 people overpaying by £10,000 or more. These individuals will be high earners or have received large bonuses this year, but that doesn’t diminish the fact that they have paid money they simply don’t owe.

“These repayments affect graduates’ ability to get a mortgage approval, save for a house deposit or start saving for their futures.

“The issue arises thanks to outdated systems. HMRC collects student loan payment information monthly, when people pay it off through their paycheques. However, HMRC only informs Student Loans Company once a year how much each individual has paid off.

“Compounding the issue is that it can take six months or more from the end of the tax year for HMRC to inform Student Loans Company of the repayment amount – meaning individuals can continuing paying towards their loan 18 months after the debt was cleared.

“Those graduates who discover they have paid off more than they owe often face lengthy waits for refunds of the money that should never have been taken in the first place.

“Anyone who thinks they are close to paying off their student loan should contact Student Loans Company to calculate up-to-date information. They can also switch to paying off the loan via direct debit, rather than through their monthly pay, which in theory should stop the overpayment issue.

“Thanks to a high-profile campaign by the media and MPs to raise awareness, the number of graduates overpaying their loans reduced slightly in 2016-17 on the previous year’s figures, but far too many graduates are still the victim of archaic systems.

“The Government has pledged to improve the systems and communications between HMRC and Student Loans Company, so that by April next year graduates shouldn’t face this issue. This change can’t come soon enough for graduates who are out of pocket.”

Figures for 2016/17:

Band

Total Over Repaid Amount*

 Number of Customers with an Over Repayment**

£000-£249

£          4,150,800

                   35,730

£250-£499

£          6,762,400

                   18,720

£500-£749

£          6,447,000

                   10,500

£750-£999

£          5,676,600

                     6,570

£1000-£1249

£          4,714,200

                     4,220

£1250-£1499

£          3,814,700

                     2,790

£1500-£1749

£          3,106,200

                     1,920

£1750-£1999

£          2,388,000

                     1,280

£2000-£2249

£          1,966,700

                        930

£2250-£2499

£          1,656,000

                        700

£2500-£2749

£          1,337,500

                        510

£2750-£2999

£          1,060,200

                        370

£3000-£3249

£             878,600

                        280

£3250-£3499

£             803,200

                        240

£3500-£3749

£             623,400

                        170

£3750-£3999

£             535,700

                        140

£4000-£4249

£             448,400

                        110

£4250-£4499

£             331,600

                           80

£4500-£4749

£             410,400

                           90

£4750-£4999

£             278,500

                           60

£5000-£5249

£             293,700

                           60

£5250-£5499

£             166,600

                           30

£5500-£5749

£             191,300

                           30

£5750-£5999

£             164,300

                           30

£6000-£6249

£             116,000

                           20

£6250-£6499

£             115,000

                           20

£6500-£6749

£             152,900

                           20

£6750-£6999

£               96,400

                           10

£7000-£7249

£               49,800

                           10

£7250-£7499

£               88,300

                           10

£7500-£7749

£               60,800

                           10

£7750-£7999

£               39,300

                           10

£8000-£8999

£             144,500

                           20

£9000-£9999

£             169,800

                           20

£10000-£14999

£             243,900

                           20

£15000+

£             286,000

                           20

All Bands

£        49,768,700

                   85,720

Source: Freedom of Information Act request from AJ Bell, to Student Loans Company

Notes: * = rounded to the nearest 100. ** = rounded to the nearest 10

 

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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