The Student Loans Company (SLC) has come under scrutiny for imposing substantial penalty interest rates on hundreds of thousands of graduates who fail to update their personal details in a timely manner. Official figures reveal that over 228,000 borrowers were charged the company’s higher non-compliance interest rate (NCR) during the 2025/26 financial year, marking nearly a 140 percent increase since 95,000 were penalized in 2021-22.

The NCR is applied when borrowers do not notify the SLC of changes in their marital status, address, employment, or other personal circumstances as required. This results in penalty interest charges that can accumulate to thousands of pounds annually, in addition to their regular loan repayments. In one striking case, a single graduate accrued £11,677.81 in penalty interest.

Graduates living abroad appear especially vulnerable to these charges. The SLC requires overseas borrowers to provide updated information manually and upon request, which increases the risk of missed deadlines and subsequent penalties. Bill McKinney, 31, a University of Kent graduate with £45,000 in student debt, moved to the United States three years ago. He said difficulties communicating with the SLC and unmanageable repayment amounts led him to stop payments, which triggered the NCR charges. “I would happily pay my loan but I’m not contributing to a system where the interest is going up faster than I can pay it off. I just look at them like they’re a loan shark,” McKinney said.

The rising use of the NCR has attracted attention amid an ongoing parliamentary inquiry into the student loan system. Lord Smith of Finsbury, chancellor of the University of Cambridge, expressed concern that the higher education experience is increasingly “darkly overshadowed” by what he described as a “wretched” loan repayment system.

In response, the SLC stated it has introduced several measures aimed at improving communication with overseas borrowers. These include live chat services, extended opening hours, and enhancements to its online customer portal, all intended to make it easier for borrowers to maintain contact and avoid penalties.

Despite these efforts, the rapid increase in penalty interest charges has drawn criticism from borrowers and advocates who argue that the system disproportionately penalizes those facing difficulties in meeting administrative requirements, particularly those living abroad.