The Student Loans Company (SLC) is trialling automatic bank refunds to individuals who have overpaid their student loans, as part of moves to improve its repayment service
The new online repayment service allows graduates to see and manage more up-to-date information about their student loan balance to address overpayments, which were caused by Student Loans Company failing to close loan accounts once the debt was paid off.
Now the Student Loans Company is running a trial with people who have not signed up to its direct debit scheme to avoid over-repaying and who have not yet responded to communications on how to claim their money back.
Individuals whose student loan accounts are in credit may receive a refund if steps can be taken to successfully validate their bank account details. This will be paid directly into customers’ bank accounts and will show as ‘SLC receipts’ on their statements.
Student loan payments should stop when the debt has been cleared, but last year a freedom of information request by higher education publication Research Professional found almost £308m was overpaid on student loans over the nine-year period between 2009-10 and 2017-18.
More than 510,000 students continued to have deductions made after the loan was paid off, with an average of £600 owing.
Most saw the overpayments refunded, but £28.5m remains unclaimed and is held by the government.
In April 2019, the government introduced legislation to bring in more frequent data sharing between Student Loans Company and HMRC so students can see more up to date loan balances.
Prior to that date, Student Loans Company only received repayment information once a year from HMRC at the end of the tax year, meaning there could be a lag before the repayment system recognised the loan had been paid off, which meant some people made unnecessary repayments.
Steven Darling, director of repayment & counter fraud at Student Loans Company, said: ‘We are always looking at ways to improve the service that we provide, that is why we are starting this trial, alongside other improvements to the repayment service that we’ll be introducing later this year.
‘While we are always pleased to be able to refund customers, we do not want customers to over-repay in the first place.
‘Repaying too much is avoidable because we ask customers to take control of the final stages of loan repayment and make the switch from repaying through their salary to direct debit.
‘We want all of our customers to keep their details up to date so that we can let them know when it is their time to put a direct debit in place and strongly urge customers to take this action.’