Howard Croft: Student loans system is a taxing process

Those with student loans are required to pay promptly  there is no obligation placed on HMRC to act promptly.
Those with student loans are required to pay promptly  there is no obligation placed on HMRC to act promptly.

I have for some time been vaguely aware of concerns about the administration of student loans, but I have never had a serious conversation with anyone about it.

My niece and two nephews, now safely graduated, haven’t raised the subject so I supposed that this was no more than irritation with government or quasi-government departments, which are famously incompetent, unresponsive and obstructive.

For those like myself, full of years, this is a tiresome feature of life that we have long since accepted as inevitable and impossible to change and have decided to avoid getting worked up about it.

Thanks to a young graduate, Laura Suter, now a journalist, and her efforts it is featuring in the national press.

This week it is on the front page of the Money section of the Daily Telegraph.

I know that journalists have much to occupy them – BREXIT, the doings of junior members of the Royal Family, Donald Trump and so on – but I suspect that they do not take students seriously.

They are widely viewed by the mature members of society as idle parasites, reluctant to wash and inclined to stay in bed until all hours, often not alone.

Be that as it may – I make no judgement – the fact is that they are being treated monstrously.

The real problem comes not when they are trying to borrow money, although I know that there are often delays and universities have funds to bridge them in such cases, but when they are trying to pay it back.

With commercial banks it is the other way round, as they will quickly discover.

Student loans are administered – managed would not be the word – by the Students Loans Company, a quango set up for that purpose and that purpose alone.

Repayments are deducted from former students’ monthly salaries by employers once their gross annual earnings exceed £21,000.

These deductions are reported monthly to Her Majesty’s Customs and Revenue (HMRC) along with income tax deductions in the usual way.

However, HMRC passes this information to the Loans Company only annually, not promptly, and the company uses this to prepare an annual statement to the debtor.

The debtor receives this statement about seven months after the end of the tax year, by which it is already out of date.

Students cannot keep track of their progress by looking at their payslips because of the mysterious way in which interest, at a penal rate, is added to the debt.

The result of this scandalous inefficiency is that many former students continue to make repayments after the debt has been fully repaid.

In the tax year 2015/16, the latest for which figures are available more than 14,000 overpaid more than £1,000, some as much as £10,000 and are left with a phantom debt that will reduce their borrowing capacity for, say, a mortgage.

The Loans Company does alert people who are over-paying, but only after about 19 months.

The good news is that those who have overpaid can recover their money – but woe betide them if they have not kept their payslips; they will need them to do this.

The other good news is that interest, but at a measly rate about a tenth of what they have been paying on the loan, is paid on the over payment, but only for 60 days.

The processing of payslips takes 28 of those days.

Those with student loans are required to make payments promptly and their employers are required by law to pass repayment collection monthly in real time.

There is no such obligation placed on HMRC to act promptly and given that they have all the information and hold it on powerful great computers, manned by armies of inky-fingered clerks it is hard to explain why they seem unable, or unwilling perhaps, to do so.

Certainly, they have offered no explanation.

No doubt if pressed to do so HMRC will blame the Students Loan Company, and vice versa.

There are some who have little sympathy for students, possibly because of their alleged ugly life-styles: idleness, moral turpitude and disregard for personal hygiene, but they are human beings nevertheless and should be treated decently.

They are not, and it shames us all.

The irony is that some of them may go on to be 
employed by HMRC or the Students Loans Company.