One million people wrongly overpaid loans last year and could be owed £1,000s
One million former students have overpaid their student loan last year and are entitiled to potentially claim £1,000s back.
According to an investigation by Martin Lewis' Money Saving Expert website, in 2022-23 around 833,000 people repaid their student loans despite not earning enough in the tax year and 165,000 people were on the wrong student loan payment plan.
The Freedom of Information (FOI) request revealed that 57,000 people had money deducted after the loan was fully repaid and 39,000 started repaying their loans too early. MSE says the overpayments could be due to incorrect details or processing by you, your employer or the Student Loans Company.
In the UK, student loans are repaid at 9% of everything earned over the annual threshold of your particular student loan plan.
In a nutshell, in England, if you started university before September 1 2012 you will be on Plan 1 and your threshold is £22,015. If you started between 2012 and July 2023 then you're on Plan 2 and your threshold is £27,295. If you started your course after August 2023, then you are on Plan 5 and your threshold is £25,000.
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However, in practice, repayments are taken from payroll monthly if you earn over the monthly equivalent threshold. This means those who had variable incomes or commissions - or who had time out of work in that tax year - likely paid for their student loan in some months so could claim back if they didn't earn over the annual threshold.
MSE reports that overpaying on a loan is usually a good thing as you clear the debt quicker and repay less interest - however, student loans don't work like normal loans. Currently, the majority of people with student loans are on Plan 2 which at the moment has an interest rate of 7.3%.
This means many likely won't pay these loans off during their working lifetime - MSE noted that even Government stats show that over three-quarters of people won't clear these loans in full before they wipe after 30 years.
This means that overpaying these smaller amounts won't reduce what you have to pay in the future - so MSE says "you don't gain by overpaying" and only the very highest earners who will clear their loans sooner will gain.
How do I reclaim an overpaid student loan?
MSE says that you should try and collect old payslips, your payroll number and a PAYE reference number and then give the Studen Loans Company a call on 0300 100 0611 if you're in England. If you do not have these documents then MSE says it "is still worth giving it a go" although it may take longer.
You should then explain your situation and ask to reclaim the money you are owed. However, if you are reclaiming because you think you earned under the threshold in the tax year then you will need to wait until the tax year is finished.
If you are reclaiming as you believe you're on the wrong payment plan, you should first double-check what plan you're on with your employer or ex-employer first, and check this doesn't correspond with the plan you should be on.
There are no restrictions on how far back you can claim so you can make a claim even if you overpaid years ago.
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