The government is holding more than £28m of overpayments made to the Student Loan Company (SLC) in error, as a result of repayments being deducted from individuals after they have paid off their loans in full.
Payments should stop when the debt has been cleared, but more than 510,000 students continued to have deductions made. The average overpayment was around £600 with total overpayments hitting £308m, representing nearly a tenth of total loan debt collected by the SLC.
Most of the overpayments were paid back, but £28.5m remains unclaimed and is held by the government. Officials said that often they cannot get in touch with the graduates to settle the sums due to multiple changes of address, emails and contact details. Even though students have to set up an online account when they first take out a student loan, many have never used it and do not know how to access their records online, having forgotten the email address they used when they first signed up at 18, for example.
Since 2011-12, the size of the student loan book (value of all the outstanding loan debt owed to government) has increased from £46bn to over £136.7bn, significantly increasing the volume of repayment traffic that the SLC and HMRC manage.
The figures came to light after 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.
The SLC said it has tried to contact people who have been overcharged to arrange refunds, and urged anyone who thought they had overpaid to get in contact.
The company writes to people who have two years of repayments left to suggest they pay by direct debit rather than through their employer to help prevent over-repayments.
A SLC spokesman said: “We want all customers to repay the right amount and not to over-repay on their loan. Customers who do not participate in the direct debit scheme can also claim a refund at any time by contacting us.”