Time called on student loan overpayments

A common complaint from graduates repaying their student loan through the tax system is that they often find money continues to come off their wages, even when the full loan has been repaid. In 2015-16, 86,000 people with a student loan overpaid, and the average overpayment per graduate was £592 – equivalent to many people’s weekly wage.

Currently, two years before someone is due to finish paying their student loan they are given the option of paying via direct debit. Graduates who take up this option don’t overpay. Those who carry on paying through the tax system can find themselves paying for up to 12 months longer than they should. They then have to ask to get the money refunded, but this can often be a lengthy process.

This can have a big impact on the personal finances of thousands of people. To help eliminate this burden, HMRC and the Student Loans Company are developing a system which will stop overpayments.

By April 2019, HMRC and the Student Loans Company will have a system in place to regularly share data, which will mean loan repayments will automatically stop when a borrower has fully repaid, without them having to opt into the direct debit scheme. 

This new announcement follows the Prime Minister’s commitment in October to raise the income level that triggers student loan repayments from £21,000 to £25,000 a year in 2018-19, and increasing this with average earnings thereafter. Around 600,000 borrowers (with post-2012 loans) are expected to benefit from the threshold changes, helping to secure a better future for the next generation.