Rise in student loan over-repayments

Thousands of graduates are unknowingly being overcharged for their student loans every year, according to figures obtained by the Conservative party.

Government figures show that more than 21,000 people continued making payments to the Student Loans Company last year even though they had already repaid their debt.

The figures, obtained by the Tories in a parliamentary question, show that 21,774 graduates paid too much last year compared to 12,638 overpayments in 2004, 7,686 in 2003, 2062 in 2002 and 267 in 2001.

David Willetts, the shadow education secretary, said the "Kafkaesque'" system was not fit for purpose. It is estimated that about 1.4 million people are repaying loans but that figure is expected to balloon following the introduction of tuition fees this year.

Once graduates earn £15,000, the tax office automatically deducts 9% of their salary. When a loan is close to being repaid, the Student Loans Company sends a letter to the graduates, requesting them to send their P60 or pay-slips for the current tax system. The company then sends a "stop notice" to the HM Revenues & Customs.

A spokesman for the Student Loans Company told the Daily Telegraph that all additional payments were refunded with interest at the end of the financial year.
However, Mr Willetts told the Telegraph: "It should be simple to redesign the system so that the loans company is regularly informed about repayment progress."