Student loan companies are overcharging you by £580 every year
They raked in an extra £45million in 2014
Cash-strapped grads are being overcharged by a whopping £580 a year on their student loan repayments.
The Student Loan Company (SLC) have been caught out making 80,000 graduates shell out 10 per cent more every year.
What’s more, thousands have repaid more than they’re supposed to from their pay packets – totalling £45.4 million.
This is a 10 per cent increase on the year before when the company overcharged borrowers by £41.4million, according to figures obtained by accountancy firm Baker Tilly.
Automatic repayments begin when a graduate starts to earn over a certain amount of money after finishing uni – £17,335 if you started uni before 2012 or £21,000 if you started after.
The money is collected through the UK tax system when borrowers stay in the country.
But the SLC only receives information from HM Revenue and Customs (HMRC) about what customers have repaid once a year – after employers have finalised their annual tax returns.
This means there is a “time lag”, so thousands of people nearing the end of their repayments overpay, unless they choose payment by direct debit.
If graduates do overpay, they can face even more problems and delays in getting their over-repayments refunded, according to Baker Tilly.
Overall, findings posted at myinstantoffer.com show that more than 78,800 people made over-repayments on their student loans in 2013-14 by an average of £580 each.
The number of people paying back too much has been gradually increasing since 2009-10 when 52,600 people over-repaid through their employer payroll.
One of those who overpaid last year was Anna O’Callaghan, a 2004 graduate, who said that she found out that was owed money only after a friend was reimbursed by the SLC.
She said: “Nobody writes to tell you that you’ve been overpaying, it’s up to you to find out.”
Anna continued to repay around £300 a month before contacting the SLC to query her account.
Having started the tax year owing just £355, she discovered she had overpaid by roughly £2,800.
But after asking her employer to write a letter confirming her payment details to the SLC, Anna received her rebate within a month.
She said: “It was really nice to get the money back, but of course I’d rather have had it in my bank account earning interest.”
Lesley Fidler, employee benefits director at Baker Tilly, said it’s “beggars belief” that the mechanism for collecting student debts does not take into account when loans have been settled.
She added: “For some people, monthly student loan deductions are a significant proportion of their income, and these overpayments could be causing real financial hardship.”
In response, a spokesperson for HMRC said it was working with the SLC to streamline the repayment process, utilising real-time information from employers, in order to reduce the number of overpayments.
“Refunds are paid with interest to anyone who doesn’t switch to direct debit and over-repays, and they’ll be contacted automatically.
“HMRC automatically send stop notifications to employers when advised by SLC, but we have no access ourselves to personal information, including the outstanding loan balance.”