Chris Parr explains how he tracked millions the Student Loans Company took in overpayments
Two years ago, your humble correspondent received a dodgy-looking email promising a £500 cash payment simply for calling a Glasgow phone number. It turned out not to be dodgy at all.
The Student Loans Company, it emerged, had continued taking loan repayments long after your correspondent’s full loan balance had been repaid. It was a quirk of the system: the SLC and the Treasury communicated only once a year about where graduates were up to with their loan repayments—an oversight that meant tens of thousands of graduates were overpaying through pay-as-you-earn without even noticing it.
Overpaying is one thing, and it was an issue that was known and covered fairly widely. The scandal, though, is that so much of the overpaid money has not been refunded to its rightful owners. It is no big deal to be short-changed in a shop as long as the error is quickly noticed and rectified. But that is not what is happening.
Two years ago, Research Professional News revealed the extent of the problem in England. According to data we eventually obtained on appeal after our initial freedom of information request had been rejected, more than £28 million in overpaid student loans had accumulated in government bank accounts between 2009 and 2018, unclaimed by its rightful owners.
Our investigation was followed by two years of reform at the SLC—including the launch of an online repayment service designed to make it easier for customers to manage their student loan and to help avoid over-repayment. So have the changes worked? The short answer is probably ‘sort of’. But there is still much to do.
Today, we can reveal that in the two years since our last investigation, a further £5.45m in unclaimed overpayments has amassed in government bank accounts. This is not exactly what success looks like.
Again, we had to jump through hoops to get the information. After being told that we could get the data without a freedom of information request, we were then told (two weeks later) that the laborious FOI approach would, in fact, be our best route. Nonetheless, we eventually got hold of the stats.
What the data tell us is that the SLC has steadily improved in terms of reducing the amount it is collecting in overpayments per person. For example, the 26,840 people who are owed a refund after overpaying in 2019-20 are due an average of £78. In contrast, the 7,650 people who have had unclaimed overpayments resting in government accounts since 2015-16 are owed an average of £671 each. The average amount owed declines each year for which we have information.
All the latest data for each year since 2015-16, including the total number of people owed money and the amounts they are owed on average, are covered in detail on our HE pages.
The unfortunate reality is that many people will never be reunited with their money. For example, two years ago, our figures showed there was £6.3m in unrefunded overpayments made in the year 2015-16. This year’s data show that £5.1m—or 81 per cent—of that money remains unclaimed.
Likewise, data from two years ago showed that £5.9m of overpayments made in 2016-17 had not been refunded. That amount is now down to £4.4m—meaning that three-quarters of the money from 2016-17 that lay unclaimed in 2019 is still sitting in government bank accounts.
Clearly, all of this money is not going to be returned to its owners. Because loans can take years to pay off, and the overpayments are taken at the end of the repayment process, the SLC simply does not know how to get in touch with the people owed the money. Say it takes 15 years to repay a loan. How often did you change your home address, email address and phone number in the 15 years after you graduated? Did you tell the SLC each time?
A spokesman for the SLC told Research Professional News that improvements made in the past two years had “resulted in a 38 per cent drop in the amount over-repaid since 2018”. He added that the SLC was contacting “every customer two years prior to the end of their loan [to] urge them to switch their repayments to direct debit during this period”, which reduces the risk of overpayment.
“In addition, we now automatically refund customers, and last year we automatically refunded £3.5m, but we can only do so if we hold up-to-date contact information,” the spokesman added.
A matter of principle
These improvements are welcome and the figures suggest that while graduates are still overpaying in their thousands, the SLC is taking a far smaller sum from each one of them. But this is not just a matter of money. There is principle at play too.
The shift in the balance of higher education funding from the state to the consumer through tuition fees has been one of the most significant changes in policy of the past 20 years or so. In return for shouldering this burden, students are offered relatively generous loans and repayment terms and afforded time to repay. It is something of an insult to then let that balance go to pot because of an overzealous collection system.
Rachel Hewitt, director of policy and advocacy at the Higher Education Policy Institute, said it was “critical to the operation of, and trust in, the student loan system that the system works as it is meant to”.
“It is unethical for the loan recipients to have to take the responsibility for ensuring they are not overpaying, and it shows flaws in the system that there is still such a significant number of graduates overpaying,” she added. “It is essential that this is addressed, to avoid further distrust in the loans system.”
The statistics we are publishing today are only the tip of the iceberg. It is unacceptable that just under 60,000 England-domiciled graduates and other students are owed a total of £18.4m that has been overpaid since 2015—an average of more than £300 owed to each person. However, there will be millions more in unrepaid loans dating back further, and our analysis today suggests that progress in reuniting that money with its owners is painfully slow. There is more work to do.
Anyone who thinks they may have over-repaid should check their account balance on the Gov.uk website and ensure their contact details are up to date. If an over-repayment is showing, they should update their account to receive an automatic refund, or contact the SLC to request a refund.
This article originally appeared in our 8am Playbook email.