An article published in an online British newspaper reported that over 300,000 college graduates have received refunds from the Student Loans Company over the past 5 years for being overcharged while repaying their student loans. The Student Loans Company is a non-profit government organization that provides loans and grants to student attending universities in the UK.
In total, the Student Loans Company has had to pay more than £53m to around 77,0000 affected graduates in the past year alone. The average refund received per graduate has increased to £690 per person. The repayments are largely thanks to a Freedom of Information request submitted by the Labour Party.
The average amount of refunds issued has risen nearly 50 percent since the 2011-2012 school year and many more graduates will likely be affected as well because of the way the repayments are managed. Shadow Education Secretary Angela Rayner called this a huge mistake and criticized the Student Loans Company for seeming unwilling to help former students claim the money owed to them.
The initial overcharging is a result of payments taken by the Student Loans Company for balances that had already been repaid. Some students had also been charged by the company in spite of their earnings being below the annual repayment threshold.
The problem has been linked to the fact that repayments are collected through the tax system which is only is updated by Revenue and Customs once yearly. This means graduates who lose their jobs or unexpectedly fall below the minimum salary threshold are at risk for being overcharged until this change is noted.
A spokesperson for the Student Loans Company stated that if the company finds out a borrower has overpaid then they will reach out to that person using the most recent contact information on the individual’s account. This allows them to quickly provide refunds. Former NUS President Wes Streeting responded that it took him numerous contacts over a period of more than 6 months to have his over-payments addressed.
Sorana Vieru, who is the vice president of higher education at the National Union of Students, has stated the the government should be making every effort to fix the issues with the student loans repayment system. She also pointed out that the bigger problem is the changes students face in the student loan repayment threshold.
The student loan contract requires graduates to begin making repayments on their loans once they begin earning more than £21,000 per year. This amount has remained the same since 2012 in spite of the fact that the average salary a graduate receives has continued to fall. Today the average student will pay £306 more per year in 2020-21 as compared to 2016-17.
Vieru added that a progressive system does not need to change the terms and conditions in order to recoup money. She feels this is a betrayal of students and demonstrates a lack of concern for their future. Many graduates have spoken out about their frustrations, which shows that the long-term impact of student loan debt is not just affecting Americans but is an issue facing students worldwide.