Student Loans - HMRC Keeping Interest

ajl119

Hi,
Just a quick question about student loan repayments?

The HMRC takes money from my wages each month, but only informs the Student Loans Company of the exact amount that I paid at the end of the tax year.

During this time throughout the year, my outstanding loan amount is going up due to the interest on the loan (even though I am making contributions). And at the same time the HMRC is collecting interest on the money I have been repaying whilst it is holding my money, and not handing it over until the end of the year.

How is this legal? And how can I make an application to claim back the lost interest, and appeal for the incorrect interest increases of my loan whilst the government has been holding my money?

If I payed the SLC with direct debit for the entire life of the loan, instead of through the HMRC I would have finish paying back my loan almost 6 months earlier!?! :mad:

What do you think? Is it illegal and should the government stop taking interest whilst it holds onto our repayments, all whilst our loans go up?

redpete

No

I think you have left an option off the poll. 'I have not understood that at the end of each year the interest is worked out on the basis of when HMRC received each payment, not when the payment is passed on by HMRC'.

Kim_13

It's not as bad as is initially feared upon realising that HMRC only pass the payments on once a year (as redpete says they do take the payments off the balance at the end of the year before they add the interest), however I do still find it a bit wrong.

Reading more about how payments are handled online, it seems that once the SLC receive the repayments, they are averaged over year rather than going to the balance exactly as they were taken from salary. Therefore, surely anyone who receives a pay rise (or a bonus) mid way through the tax year is paying less interest than they would have done if they were paying directly to the SLC, while anyone unlucky enough to have their income decrease is being dealt an additional kick in the teeth in the form of paying more interest than they'd have done had they paid the SLC directly/had their payments applied exactly as they were made and not as an average.

The alternative seems the fairest way to me, but of course that'd be more work for the HMRC.

Darksparkle

This was raised before. With RTI it was asked why this wasn't passed to SLC through that. Can't remember the exact response but I believe it was SLC that didn't want the payment more frequently rather than HMRC not wanting to pass it on. I would imagine it will eventually change.