‘Jaw-dropping’ £20 million over-repaid in student loans

UK graduates over-repaid their student loans by a “jaw-dropping” £20 million last year, figures reveal.

An increase in over-repayments – the first since figures began – was the result of the Student Loans Company (SLC) staff working from home during the pandemic, according to the organisation.

SLC figures show that 52,200 graduates over-repaid their student loans in 2021-22 – a 15 per cent increase from 45,300 in 2020-21.

They over-repaid a total of £20.4 million to the SLC last year – 19 per cent more than the year before, and the first increase in over-repayments since comparable records began in 2015-16.

However, this was still below the £23.2 million over-repaid in 2019-20, and £53.6 million when figures began.

The SLC said the increase in customers over-repaying can be “predominantly attributed” to effects of the Covid-19 pandemic.

As staff transitioned to remote working, some customer contact practices were paused to ensure students and providers received their loans on time, the SLC said.

This meant the company stopped contacting borrowers about over-repayments and created an “inevitable backlog”.

Chloe Field, vice-president of higher education at the National Union of Students, said this was an unacceptable reason and that any over-repayment is “money unfairly taken from students’ pockets”.

“While we recognise the unique challenges Covid posed to all organisations, it is simply wrong for students to be penalised through no fault of their own. Students who have overpaid must now be refunded and we would remind the SLC of their duty of care to ensure no one is left in financial hardship because of its mistakes.”

She urged the SLC to review its repayment processes and take the necessary steps to prevent any future over-repayments.

The figures are yet more evidence that the current system is failing students and society, she added.

The SLC data showed that the average overpayment rose from £377 in 2020-21 to £390 last year.

Sarah Coles, head of personal finance at financial services firm Hargreaves Lansdown, said the £20.4 million overpaid is a “jaw-dropping” figure.

“It was a horrible reversal, after years of falling overpayments, and meant graduates needlessly forked out hundreds of pounds at a time when their finances were under real pressure,” she added.

The SLC said the 2021-22 results should be considered an outlier, with early data for 2022-23 indicating that the declining trend has resumed.

The organisation has introduced a number of initiatives to reduce over-repayments in recent years, including increasing the automatic refund amount from £500 to £3,000, the introduction of the Online Repayment Service, and encouraging uptake of the direct debit scheme.

Rose Stephenson, director of policy and advocacy at the Higher Education Policy Institute, said it is reassuring that the SLC expects the rise to be a one-off, but given that only one third of eligible graduates join the direct debit scheme in their final stages of repayment, more effective solutions may need to be considered.

A spokesperson for SLC said: “We temporarily paused contacting repayments customers, but they were still able to claim a refund by contacting us directly.

"We have been contacting customers as normal since January 2021 and are continually putting improvements in place, which has resulted in over repayments now being at an all-time low, continuing the pre-pandemic trend.”

patrick.jack@timeshighereducation.com