Thousands of university graduates are set to receive refunds after their student loan balances were mistakenly inflated. The Student Loans Company (SLC) is contacting affected students after it identified two separate issues affecting certain Plan 2 loans. Plan 2 repayment plans cover undergraduate courses that commenced between 2012 and 2022.
Two Issues Identified
The first problem was a technical glitch whereby incorrect income data was used when calculating interest. The second stemmed from an HMRC income reporting error, which impacted individuals earning through both PAYE and self-assessment.
The errors have affected 71,000 people altogether, comprising 41,000 whose student loan balances were wrongly increased, and 30,000 whose balances were incorrectly reduced.
Refunds and Corrections
The SLC has confirmed it will get in touch with customers whose balances have risen as a result of these problems. Those who have overpaid will be entitled to a refund. However, if your balance simply decreased and you did not overpay, you will not receive a refund - rather, your account will be corrected with the accurate interest applied. Those who have already cleared their loan entirely will not be required to begin repaying again.
The SLC also confirmed that both errors have now been rectified, adding that any amendments to your balance will appear in your next annual statement, which should be accessible before the end of September. It estimates that 1.3 per cent of current Plan 2 loans were impacted.
Apology from SLC
An SLC spokesperson said: "We are contacting some Plan 2 customers to inform them we're correcting their loan balance following technical issues which have now been resolved. Those customers affected do not need to take any action and regular repayment amounts will not change. SLC and HMRC are very sorry that this has happened."
Interest Rate Cap Announced
This follows the announcement in April that interest rates on Plan 2 and Plan 3 student loans will be capped for the 2026/27 academic year. Plan 2 student loans currently attract an interest rate of 6.2 per cent throughout the period of study, calculated using the Retail Price Index (RPI) measure of inflation plus 3 per cent.
Upon completion of their course, the interest rate is then determined by the graduate's earnings, with the highest earners being charged RPI plus up to 3 per cent. However, from September, interest rates will be capped at a maximum of 6 per cent, following widespread frustration amongst graduates who have found themselves burdened with rapidly escalating debts.
Numerous students report that their loan balances continue to grow annually despite maintaining regular repayments, owing to the existing interest rate conditions attached to their borrowing.
