HMRC Overcharges 40,000 Graduates in Student Loan Interest Error

HM Revenue and Customs (HMRC) has mistakenly overcharged 40,000 graduates on their student loans due to an error in earnings data used to calculate interest rates. This glitch, originating from the tax authority during the Labour Party government era, caused incorrect earnings figures to influence interest rate brackets, resulting in some graduates paying more than they should have for several years.

In a joint statement released Thursday, HMRC and the Student Loans Company (SLC) confirmed that around 41,000 Plan 2 graduates may see their loan balances reduced due to these overpayments. Conversely, approximately 30,000 borrowers were undercharged, which could lead to an increase in their loan balances as corrections are made.

Ollie Gardner, founder of Rethink Repayment—a campaign advocating for fairer student loan policies—expressed frustration, noting that many graduates already feel exploited as “cash cows” by both universities and the government. Gardner emphasized that accurate loan data is crucial for graduates planning major life steps like buying a home or starting a family.

Alex Stanley of the National Union of Students criticized the ongoing issues, stating, “Trust in the student finance system is fast eroding. It is a broken system that isn’t working for students, isn’t working for graduates, and isn’t working for the Government.” Stanley highlighted recent changes to loan terms and other administrative issues that have compounded graduates’ frustrations.

Wealth manager Alex Race of Rathbones pointed out that these errors are yet another way graduates are unfairly burdened financially, left feeling penalized and out of pocket.

The SLC assured affected customers that they are being contacted directly and that corrected loan balances will not alter regular repayment amounts. “SLC and HMRC are very sorry that this has happened,” a spokesperson said, urging no action from borrowers at this time as technical issues have been resolved.