provided she had given clear instructions to the University which account the money should be paid into and the University have simply ignored those instructions then the University are at fault here. There is a potential problem because you don’t say whether she ever told them to remove the old account from their records so whilst she may have given them the new account details it may not have been immediately apparent that this was a change.
It is unlikely that the bank will deal with her as the intended recipient because she is neither the person that has the money nor the person which sent it.
This is going to have to be dealt with by the University who are going to have to get their bank to contact the recipient’s bank and the recipient’s bank other then going to have to contact the recipient and the recipient is then going to have to send the money back. From experience, this can often take weeks.
If the account had been closed then, the money would have disappeared into a black hole and eventually resurfaced weeks later. Why it doesn’t immediately get sent back because the account doesn’t exist I have no idea but that’s something to do with the banking process.
Because the account is in overdraft it may be that the recipient bank will not send the money back unless the recipient (the ex) deposits funds.
Legally the situation is that the ex has the money (it has reduced the overdraft) and he is not entitled to it and he should return it. If he doesn’t and he spends it then he actually commits a criminal offence. If he simply refuses to refund the money then it is a case of the University taking Small Claims Court proceedings against him.
Whilst there are numerous practical difficulties with this they are University to resolve and if the University are slow dealing with this refuse to deal with it then your claim is against the University. They owe you money and they have sent it off to somewhere else through no fault of your own. If however they simply refuse to deal with this either by refunding you first and chasing the money or even chasing the money at all, then there is no alternative but partner to take the University to the Small Claims Court which isn’t going to be quick.
I appreciate this is bad news .
Can I clarify anything ?