Overpayments relating to student loans are going unclaimed

Zarvin Vandrewala, Supervising Solicitor, has commented on recent research, for those with student loans as a discussion point, which concluded that the government has received more than £28m in unclaimed student loan overpayments.

One of the biggest debts in recent generations, second only to a mortgage, is now the balance of a student loan.

Having recently discussed student loans with The Student Loans Company (SLC), I was not that surprised to read this recent news.

Student loans were introduced to assist students in covering their tuition and living costs whilst studying. The repayments for which are deducted from graduates’ salaries each month.

Payments should stop when the debt has been cleared – but the research shows that for more than 510,000 students, between 2009-10 and 2017-18, their deductions continued after the loan was paid off.

A Freedom of Information request, by a higher education publication, showed almost £308m in over-payments had been received which roughly averaged to around £600 per person. Most of this was however paid back – but £28.5m remains unclaimed and has stayed in the government’s hands. The overpayments occurred as a result of payments continuing to be taken even after the loans had been paid off in full.

I myself have been repaying my student loan to the SLC since I graduated. You tend to forget that it’s there and certainly, until the annual statement is received or you check online, forget the total balance which is left to pay on it.

Having contacted SLC recently to make enquiries about how to pay the balance off a student loan, they confirmed to me that it was best to pay it off at the end of the financial tax year, or move to a direct debit, as they had an annual data sharing policy which meant there could be a delay before the repayment system recognised the loan had been paid off, and deductions would continue. However, recent policy changes have confirmed this will instead move to a weekly system, therefore providing much less of a delay.

I think such a change is crucial. Student loans have been in place for many years so it’s quite surprising that it has taken so long to move to such a structure though. The overpayment figures which were released are quite eye opening and the reality is that in any other loan situation (for example a car loan) such a process would cause an outcry and not be acceptable at all.

The SLC said it proactively seeks to contact all customers who have overpaid in order to arrange refunds, and that data sharing between government departments has improved to prevent overpayments.

Here are some helpful hints on staying aware of your student loan and ensuring it doesn’t get put to the back of your mind!

  • As ever, read your correspondence. If the SLC write to you then see what they’re saying, and if you’re unsure just contact them. My recent contact with them was very positive.
  • Make sure to monitor your balance. If all you do is check your annual statement, then it’s better than nothing. Check the balance and if it looks like it’s coming to an end, then contact the SLC to see what options for repayment are available.
  • Keep them updated. Just with any debt, it is vital that they have accurate contact information – if for nothing else, so you can get your refund if this happens to you!
  • Set a diary reminder to check your balance and/or to cancel your direct debt.
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