Over-payments could be causing 'real financial hardship', says Baker Tilly representative

The Student Loans Company (SLC) is overcharging almost 80,000 graduates by ten per cent every year – leaving them £580 out-of-pocket each time.

Figures obtained under the Freedom of Information Act by accountancy firm, Baker Tilly, show how graduates over-repaid more than £45.4m through their salary deductions in 2013-14.

This is a ten per cent increase on the previous year when the company overcharged borrowers by £41.4m.

Automatic income contingent repayments (ICR) begin when a graduate begins to earn over a certain amount of money once they complete their studies. The repayments are collected through the UK tax system where borrowers remain in the UK.

However, as 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 – there is a ‘time lag’ which means thousands of people nearing the end of their repayments overpay, unless they opt for payment by direct debit.

If graduates do overpay, they can potentially face further hurdles and delays in getting their over-repayments refunded, Baker Tilly said.

Overall, the accountancy firm’s findings 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 making over-repayments has been steadily rising since 2009-10 when 52,600 people over-repaid through their employer payroll.

Baker Tilly’s employer solutions associate director, Lesley Fidler, described how, in 2015, it “beggars belief” that HMRC and the SLC can’t develop a more efficient system which takes the right amount of money at the right time from people who want to repay their student loans.

She said: “For some people, monthly student loan deductions are a significant proportion of their income and these overpayments could be causing real financial hardship.”

The part Ms Fidler said she found most “galling” was the fact that employers are required – under threat of penalties – to report to HMRC in real-time, but there is no corresponding duty on HMRC to report each repayment to the SLC.

They only have to report and pay once a year – once the tax year has ended, she said.

Referring to the “double standards” which see some borrowers having to jump through numerous hoops, or face a lengthy wait, to receive their refund, Ms Fidler said the accountancy firm’s findings show how the problem is “getting worse rather than better.”

Blasting the SLC for failing graduates, she said: “We know that the SLC is currently working with HMRC to explore opportunities to make better use of data received from employers in real-time, but they need to get a move-on to bring the current antiquated and inefficient system into the 21st century.”

Comments