Call for clarity over Student Loans Company problems

Students are paying more for their university education in England than ever before

There has been a call for an urgent inquiry into problems at the Student Loans Company which led to the suspension of its chief executive.

Shadow Universities Minister Gordon Marsden said the firm was near "meltdown" and urged the Universities Minister to address the problems.

The Department for Education suspended Steve Lamey in July without saying why.

A DfE spokesman defended the student loans system and said Jo Johnson would respond in due course.

In early July, a statement from the DfE said: "The Student Loans Company, in consultation with the Department for Education, took the decision to suspend the chief executive, pending an investigation into concerns which have been raised.

"The suspension is a neutral act and does not imply wrongdoing.

"As the matters leading to suspension are now subject to an independent investigation, it would be inappropriate to comment further at this time."

'Overpayments'

But this week, Mr Marsden wrote to Mr Johnson, asking him to clarify the details around the suspension and the nature of the associated investigation.

He told the BBC: "Whilst the full details have yet to become clear, the Student Loans Company appears to be approaching a situation of meltdown.

"There needs to be an urgent, substantial inquiry into all aspects of the way they operate with HMRC."

His letter continues: "This worrying situation has been compounded by an ongoing stream of accounts over the past few months in the media, and based on numerous individual stories appearing, of the inadequacies of the Student Loans Company to properly administer student loans and specifically repayments."

He highlighted that the number of student loan customers who had overpaid their debts rose to 86,000 in 2015-16, from 52,000 in 2009-10.

And he asked Mr Johnson to set out what steps he and his officers were taking to address the issue.

He called for a review of the system of communications between HMRC and the company, after reports that the SLC was only getting salary information on borrowers at the end of the tax year.

This is thought to have led to more overpayments by customers than may have been necessary.

'Pressures'

He wrote: "The deteriorating situation suggests that there are significant management pressures at the SLC, both in processing this information and then in rectifying overpayments.

"So are you able to give assurances that there will be no further cuts in staffing resource or capacity at the SLC?"

A spokesman for the DfE defended the student loans system, which debits money directly from earnings through the tax system, saying it was fair.

The spokesman said: "No borrower need overpay their loan.

"The SLC gives all borrowers the option to repay by direct debit two years before they are due to repay their loan and borrowers who take up this option will not overpay."

Any borrower who believes they have overpaid should contact the SLC as soon as possible.

Mr Marsden pointed out that the problems at the firm come at a time when some students leave university with debts of up to £57,000.

He also raised the issue of graduates facing the prospect of paying 6.1% on their student loans while the Bank of England base rate is 0.25%.

The interest rate is due to rise soon from 4.6%.

He said that, without action, the confidence of existing graduates and future students would continue to erode, to the detriment of the sector.