Thousands of college graduates are in line to get refunds following an inadvertent increase in their student loan balances. The Student Loans Company (SLC) has identified two issues affecting certain plan 2 loans, which cover undergraduate programs starting between 2012 and 2022.
One problem stemmed from a technical glitch that led to the incorrect use of income data for interest calculations, while the other arose from an HMRC error in income reporting affecting individuals with earnings through both PAYE and self-assessment methods.
A total of 71,000 individuals have been impacted, with 41,000 seeing their loan balances rise erroneously and 30,000 experiencing reductions. SLC will reach out to those affected by the balance increase for necessary corrections and refunds for overpayments.
For those who saw their balances decrease without overpayment, adjustments will be made with accurate interest calculations, and if the loan has been fully repaid, no further repayments will be required. SLC has rectified both errors, and any balance changes will be reflected in upcoming annual statements before the end of September, affecting about 1.3% of current plan 2 loans.
An SLC representative stated that affected customers will not need to take any action, as repayment amounts will remain consistent. The announcement comes after the decision to cap interest rates on plan 2 and plan 3 student loans for the 2026/27 academic year, with plan 2 loans currently attracting a 6.2% interest rate while studying.
Following completion of studies, interest rates are income-dependent, with the highest earners subject to RPI plus up to 3%. However, starting in September, interest rates will be capped at a maximum of 6%, addressing concerns about graduates facing escalating debts. Many students have expressed frustration over their loan balances growing annually despite regular repayments due to the existing interest rate terms.