If you're a graduate paying off your student loan, you may be due a refund – new figures show 100,000s have been overpaying on their loans.
The number of graduates who have claimed a credit balance refund on their student loans has risen steadily over the past five years, with more than 77,000 bagging refunds averaging almost £700 in the past year alone.
The refunds are for overpayments where the Student Loans Company (SLC), the state-owned organisation that facilitates student loans, has taken money that wasn't due. This typically happens when:
- You keep paying your loan based on your old salary even after a pay cut.
- You keep paying your loan after it's paid off.
Here's how to check if you're due a refund and what to do if you are – see our Student Loan Mythbusting guide for full help on everything to do with student loans.
Why are some overpaying?
The issue relates to the fact that student loan repayments are collected via the tax system – rather than direct from your bank account every month – and the SLC only receives updates from HM Revenue & Customs once a year.
Because SLC's records may not be up to date, graduates who have paid off their loans may end up having money unnecessarily deducted from their monthly pay packets by the SLC and would therefore be owed a refund.
Why do some people overpay after taking a pay cut?
Your weekly or monthly student loan repayments are calculated according to what you're assumed to be earning – based on past HMRC data. But if you're actually earning less than you were previously, you may end up overpaying.
This can happen if you take a pay cut or stop working – though it can also occur if you previously earned overtime or bonus payments and are earning less this year.
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How can I check if I've overpaid?
You should eventually receive a letter from the SLC informing you that you've overpaid and are owed a refund. However, because the SLC only receives info from HMRC once a year, it's possible you could wait months to recoup money that you're due now.
It's also important to note the SLC uses the contact info on your account to get in touch about refunds – so it's vital those details are up to date.
Rather than waiting to hear from the SLC, if you think you may have overpaid give it a call on 0300 100 0611 to find out if you're owed a refund. You'll need your payslips or P60 for the previous and current tax year to hand.
The SLC has told us it's developing a new tool on its repayment website that will allow graduates to check if they are due a refund, which it hopes to make available next year.
How can I get a refund if I've overpaid?
If you receive a letter stating that you've overpaid your loan and are due a refund, the process is simple. Call the SLC customer service team on 0300 100 0611 – they'll verify your bank details and process the refund over the phone so that the money lands in your bank account.
If you've called the SLC on your own initiative to check if you're due a refund, you'll need to apply in writing (the address is: Student Loans Company, 100 Bothwell Street, Glasgow G2 7JD). What you need to send depends on your situation:
- If you're still paying off your loan but too much was taken, you'll need to send photocopies of your payslips showing the deductions made and your P60 for the financial year in which repayments were deducted, along with your customer reference number.
- If you've paid off your entire student loan balance but payments are still being taken, submit photocopies of your last P60 and payslips for the current financial year, along with your customer reference number and bank sort code and account number.
Once the SLC has processed your refund it will advise HMRC to notify your employer to stop student loan deductions. However, this can take a month, which may mean you have another one or two deductions taken. If this happens you should repeat the process above for a final refund.
How many graduates overpay their student loans?
It's much more common than you might expect – new figures released under the Freedom of Information Act following a request by the Labour Party show more than 330,000 graduates have had cash handed back to them by the SLC in the past five years – see the table below.
|Financial year||Number of graduates to receive a refund||Total cost of refunds||Average amount refunded|
What can I do to ensure I don't overpay my student loan?
Keeping track of your student loan repayments can be a tricky process, but it helps if you make sure the SLC has got your most up-to-date contact info – otherwise you're unlikely to get wind of any overpayments anytime soon.
Another option for those approaching the end of their repayment term is to switch to paying by direct debit – although this is only available if you're in the last two years of your term.