According to a recent article from the Telegraph, graduates typically overpay by £570 a year on their student loan repayments – the result of an ‘antiquated’ repayments process. Those graduates who are owed money have been advised to act as soon as possible.
Are graduates paying more than they have to?
The findings were made public after the Student Loans Company published a Freedom of Information request. Over 50,000 graduates every year have loan money automatically deducted from their salary, despite it never being due to be paid in the first place.
According to official date, the Treasury takes an extra £40 million every year from graduates who are being overcharged on their student loan repayments, costing £570 per graduate.
This overcharging arises from what has been described as an “antiquated” process relating to the way in which individual salaries are paid to the Student Loan Company. Graduates currently repay student loans as a proportion of their wages, with their information handed from employers to HMRC who then pass it on to the student loans body.
How did this problem come about?
Part of the problem is that whilst employers must immediately update any changes in a person’s salary, HMRC only updates this information once a year. During this interlude, the taxman pockets any extra payments that people make before the new data had been updated.
George Bull, a tax specialist at accountancy firm Baker Tilly, said: “Very little has been done to address this cosy arrangement. Such antiquated processes should not be allowed to persist in this day and age. One wonders how many of these suffered from overdraft charges or had to take on add on additional credit to make ends meet.”
The extent of the findings
The data shows that over 70,000 graduates paid more than they needed between April 2012 and April 2013. This means that the total cost for overpayments facing graduates between 2008 and 2013 has reached £167m.
HMRC is currently holding talks with the Student Loan Company to report information more quickly. A spokesman for HMRC said that any graduates who believed they had overpaid could contact the Student Loans Company on 0300 1000 0611. They will be able to authorise a refund as soon as HMRC confirms your total earnings and student loan repayments at the end of the tax year, on April 5.
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