The government has promised a major revamp of the student loans repayment system, with the introduction of an online service designed to prevent overpayments at the end of the loan term
Payments should stop when the debt has been cleared, but more than 510,000 students continued to have deductions made. Most of the overpayments were paid back, but £28.5m remains unclaimed and is held by the government.
At the end of 2019 education secretary Gavin Williamson announced that a new online repayment service will go live in 2020 and will allow graduates to see and manage more up to date information about their student loan balance.
The service is part of improvements to modernise the Student Loans Company (SLC) repayment system and will largely replace annual paper statements – although those who prefer the existing paper statements will still be able to receive them.
The Government has acted to help graduates keep more money in their pockets in the early stages of their careers as they plan to raise the repayment threshold. From April 2020 graduates will only need to start paying back their loans once they earn £26,575 – a third consecutive annual increase in the repayment threshold.
To stop students over-repaying their loans altogether, the government is also calling on graduates to switch to direct debit towards the end of their loan, rather than continue with automatic deductions from their salary.
In April 2019, the government introduced legislation to bring in more frequent data sharing between the SLC and HMRC so students can see more up to date loan balances.
Prior to that date, the SLC 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.
For instance, even if a graduate paid off their loan in November, automatic payments could continue to be deducted from their salary for the rest of the tax year. Since April 2019, HMRC has been sending repayment data to the SLC on a weekly rather than annual basis.
Gavin Williamson, education secretary, said: ‘Student loans can remain part of graduates’ lives for many years, so it’s only right we do all we can to improve the system for them. These changes will make it easier for students to understand their balance, manage their loan and avoid over-repaying.’
Chris Skidmore, universities minister, said: ‘The government is investing in the student loans system to make it as simple and easy for people to use as possible. I urge all graduates to use this new service and to join the direct debit scheme as they approach the end of their loan to ensure a smooth end and not repay more than they should.’
Last year a freedom of information request by higher education publication Research Professional found over £300m was overpaid in student loans over the nine-year period between 2009-10 and 2017-18.