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Student Loans Company Rip Off?

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Some of my younger friends on Facebook are raving about getting overpayments back from the SLC.

So what's the catch? They only go and tag the same amount back on to your loan total!!


From article:

"The amount you're paid will be added back on to the amount you currently owe Student Finance, but it's going to take you so long to pay that back anyway that you might as well get that quick cash injection now if you need it. "

Can anybody on here who knows more about such matters than me explain how this is legitimate?

Friends say they don't mind, because "I'll never pay it off anyway".

I'm pointing out (rightly or wrongly) that best case the SLC gets to charge additional interest on this figure for years to come,  worst case, they also get paid that money twice if the loan does eventually get cleared. 

There is only one winner here??

Edited by btd1981
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As far as I understand it the over payments to SLC are due to people starting/quitting jobs part way through the tax year or having income that fluctuates from month to month.

(The amount you are required to pay back is 9% of salary over £18,935 (pre-2012 loans) or 9% of salary over £25,725 (post-2012 loans), But because it's taken out of your salary each month it can lead to overpayments).

Worst case scenario is that the ex-student pays more interest than if they had "overpaid" their loan by not asking for the money back. As the interest rate is 1.75% (pre-2012) and somewhere between 2.4% and 5.4% (post-2012) it makes financial sense for many to ask for it back. 

Student also wins in the following scenarios: 
- debt written off after 30 years with a large outstanding balance
- government of the future decides to write-off all the debt early as a vote purchase scheme.

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21 hours ago, btd1981 said:

Good points, cheers.  Still hate student loans!!

You and me both!

If education is a social good (it's accepted that it is until 18) then why is it not regarded as such post-18.  

It has also lead to a highly reductive argument that the only degree subjects with value are those that provide a positive return on investment. So economics, investment banking etc are rated higher than art, philosophy etc especially from the lower tier universities. 

The reason the government is concerned about "value for money" so suddenly is because they are no longer able to use the funny accounting tricks that kept the student loans on the balance sheet at face value. 

Universities aren't blameless, they've exploited the rules of the system that encouraged them to expand places but keep the fees the same by lowering entry standards, spending on plush new buildings complete with Starbucks franchise with borrowed money just to compete. 

Another gripe I have is that it is based on parents* household income with no adjustment for whether they rent/own, how many kids they have to support, commuting costs etc.  

*parents by SLC standards include step-parents. So in effect mums' new boyfriend who you might have only known a few months is expected to pony up the cash for your upkeep!.

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