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MSE News

Graduates overpay student loans by £45m: Get your money back

By Paloma Kubiak, News Reporter

17 Aug 2015

Tens of thousands of graduates have overpaid their student loans by a collective £45.4 million, new data reveals. We explain how you can get your money back below.

More than 78,800 graduates who took out what's known as Income Contingent Repayment (ICR) loans between 1998 and 2011, overpaid by an average of £580 each during the 2013/14 financial year (the latest data available).

The figures, which were obtained under a Freedom of Information (FOI) request made by accountancy firm Baker Tilly to the Student Loans Company (SLC), includes all those who overpaid by £5 or more.

But worryingly the data also shows a year-on-year rise in the amount being overpaid by graduates (see below for the figures), which Baker Tilly blames on an "antiquated collection system".

Helen Saxon, senior money writer at says: "Because the repayment system is automated for most, it's easy for graduates to end up overpaying.

"This issue has been going on for years and HM Revenue and Customs and the Student Loans Company need to communicate more regularly about what's been paid, so this doesn't happen.

"If you're a graduate and you're close to paying your student loan back in full, contact the Student Loans Company now and ask to make future payments by direct debit. This gives you control over your money, so once the loan's paid off, no further payments are taken."

Martin Lewis
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Why do overpayments happen?

ICR loan repayments (currently 9% of everything earned over £17,335/year) are collected through the UK's PAYE tax system for the employed or through self-assessment for the self-employed.

For the employed, at the end of the tax year their employer tells HMRC the total loan deductions made. The SLC receives this information once a year, usually around May or June, after employers have finalised their annual tax returns.

But as this is a few weeks after the end of the previous financial year (which runs from April – March), there's a time lag between the information being passed on meaning money continues to be taken from students until the SLC is made aware the debt is settled.

Self-employed graduates may also overpay as there's a delay in the time between them submitting a tax return, which must be done annually by 31 January for the previous financial year, and HMRC passing this information on to the SLC.

How do I know I've overpaid?

If you've overpaid, the SLC will write to you asking you to contact it by telephone (there are different contact numbers depending on where you live).

The SLC will then contact HMRC to request your employer stops deductions, and it will refund any overpayments plus interest, as outlined below.

I've overpaid. How do I get my money back?

If you've overpaid, as soon as the SLC is made aware of this, it will send you a letter asking you to phone it and verify your bank details. Once you've contacted the SLC it usually takes five to seven working days to process the refund – a BACS transfer of the overpayment will be made to your bank account.

If you think you've overpaid, but haven't had a letter from the SLC, call it on 0300 100 0611. It will ask you for evidence showing your repayment deductions, such as your payslips or P60 before issuing a refund. Once it's confirmed you've overpaid, it'll contact HMRC to request your employer stop taking repayments and again, it'll refund the overpayment into your bank account.

Interest is applied to overpayment refunds at the same rate of interest that was applied to the loan, which at present is 1.5%.

Graduates overpay student loans by £45m: Get your money back
Graduates overpay student loans by £45m: Get your money back

How can I stop HMRC from taking overpayments?

If you're nearing the end of making student loan repayments ie, you're within two years of repaying the balance, you'll receive a letter from the SLC asking if you want to change your repayment method.

When this happens, you should say 'yes' and set up a direct debit to pay the remaining installments. The amount taken will vary depending on the repayments you've already made, but the SLC says it will calculate this for you so the direct debit payments over the next two years pay off the outstanding balance and nothing more.

This puts you in control and means you can cancel the direct debit as soon as the debt is settled. The SLC says customers can keep track of their balance and repayments by logging into its Student Loans Repayments portal.

For the self-employed, you'll see a box in your tax return asking if you think your loan will be fully repaid in the next two years, you should put an 'X' in it. On doing this, HMRC and the SLC will amend your self-assessment calculation and send you a revised statement with the amount payable.

I've a pre-1998 loan or started higher education from 2012 onwards. Am I affected?

This issue shouldn't affect mortgage style loans taken out pre-1998, which you pay back if you currently earn over £26,727/year, as the majority are paid by direct debit, card or cheque. However, if you repay via standing order, there may be a chance you'll overpay, as this is a fixed amount taken at regular intervals.

Students who started higher education in 2012 or later won't yet have started to repay their loans. The first lot of graduates will begin repaying next April, with students from England repaying 9% of everything earned above £21,000.

If you're employed, the money will be taken automatically from the payroll as with tax. Repayments will be given to HMRC, which will pass the cash to the SLC every March. If you're self-employed you'll need to notify HMRC that you need to make student loan repayments when you do your annual self-assessment form.

Millions overpaid in the last few years

The table below shows the total amount overpaid by graduates over the last five financial years, according to the SLC:

Financial year Total overpayment Number of graduates who overpaid Average over repayment per graduate
2009/10 £28.2 million 52,600 £540
2010/11 £37.1 million 64,200 £580
2011/12 £38.5 million 67,500 £570
2012/13 £41.3 million 72,100 £570
2013/14 £45.4 million 78,800 £580

'Exploring opportunities' to improve

On what, if anything, the SLC is doing to tackle the issue, a spokesperson says: "The SLC works with the Department for Business, Innovation and Skills and HMRC to ensure we continuously improve the service we provide and we will also work with other government departments to look at ways to develop and enhance the student loan repayment system.

"The SLC is currently working with HMRC to explore opportunities to make better use of data received from employers in real-time."