Revealed: 700,000+ overpaid a combined £100m+ on student loans last year – how to reclaim
A huge number of graduates and other student loan borrowers repaid over £100 million more than they needed to last year, new figures obtained by MoneySavingExpert.com reveal. The vast majority of this cash hasn't been claimed back – but if you've overpaid, the good news is it's easy to reclaim.
Figures we've been sent by the Student Loans Company (SLC) after a Freedom of Information Act request show that, in total, £106.6 million was overpaid in the 2019/20 tax year – slightly up on £105.2 million in 2018/19.
In total last year, some 756,581 overpayments were recorded. Some borrowers may have overpaid in multiple ways, so the total number affected may be slightly fewer – but at least 700,000 are known to have overpaid, as that number were reported as repaying loans despite being under the annual repayment income threshold.
For full help on how to reclaim, see our Student Loan Overpayments guide.
Why are student loan borrowers overpaying?
There are three main reasons why you have may overpaid your student loan:
- If you fell under the annual repayment income threshold... last year almost £84 million was overpaid this way. You don't need to repay anything until your income passes the annual income repayment threshold – and then you repay 9% of what you earn above that threshold. What that threshold is depends on when you started your course and where you lived before uni:
- Started uni 1998-2011 (or since and from Scotland or Northern Ireland)? This is a 'Plan 1' loan – the threshold for the last tax year was £18,935.
- Started uni in or after 2012 and from England or Wales? This is a 'Plan 2' loan – the threshold for the last tax year was £25,575.
The most common cause of people overpaying their student loan is their earnings varying throughout the year. Typically, student loan contributions are taken when you're paid – whether weekly, monthly or otherwise. So you repay when your earnings go over the equivalent of the annual repayment threshold for your pay period, eg, if you're paid monthly, the monthly equivalent.
But if over the course of a financial year your total income is less than the threshold – say because your earnings fluctuate, you lost your job partway through the year or you go on maternity or paternity leave – you can reclaim. Last year about 700,000 such overpayments were recorded, averaging around £120 each. And as of September, just £3.1 million of the £84 million overpaid this way had been reclaimed.
See a full breakdown of overpayments over the past four years
The figures we've obtained show that the amount overpaid this way has shot up, from almost £74 million in 2018/19 to almost £84 million in 2019/20. Here's a full breakdown of the data:
Year Number of overpayments Total amount overpaid Plan 1 loans Plan 2 loans Plan 1 loans Plan 2 loans 16/17 413,224 109,547 £52,162,594 £9,615,544 17/18 377,891 186,676 £49,634,867 £16,853,542 18/19 356,853 263,776 £47,921,797 £25,872,031 19/20 396,578 305,534 £57,056,871 £26,905,914
It's clear from the data that the biggest jump in overpayments is from those in the Plan 1 category. We don't know exactly why there's been an increase, but it could be partly linked to income fluctuations at the end of the 2019/20 tax year due to the pandemic. Those who had been making repayments but were then furloughed, had their hours cut or lost their job could have seen drops in income which left them under the threshold for the year as a whole.
How fluctuating income could leave borrowers overpaying – an example
To explain how this could work in practice, here's an example to show the maths:
Let's suppose a graduate from England went to university between 2013 and 2016, so they're on a Plan 2 loan, and their repayment threshold last year was £25,575.
They work for a travel company in London and earn £12.75/hour, working consistently 40 hours per week and being paid weekly. This means they earn £510/week, which equates to £26,520/year – more than the repayment threshold.
£25,575/year works out at around £491.82/week, so each week when they're paid, 9% of the £18.18 they earn over this threshold goes on their student loan, and this works out at £1.63/week.
For 50 weeks from the start of April 2019 they pay this figure, so pay about £81 back over this period. But in the last two weeks of March 2020, their travel company was forced to shut its doors because of the coronavirus pandemic and they aren't put on furlough.
They were on course to earn £26,520 in the tax year, but their income suddenly dips to £25,500 – below the threshold. They can then claim the £81 they paid to the SLC back.
- If you continued repaying after your loan was paid off... last year £19 million was overpaid this way. Data sharing problems between the SLC and HMRC can mean you have student loan repayments taken from your salary even after your loan's paid off. To prevent this, the SLC offers you the option to repay via direct debit rather than from your salary when you're close to completing repayments, though some choose not to do this.
If you overpay this way – as 31,633 did last year – the SLC will proactively try to tell you, though it can take a while for this info to filter through from the taxman (make sure the SLC has your most recent address). Most who overpay for this reason eventually get their money back – as of July, nearly £16 million of the £19 million had been returned to borrowers. If you haven't yet had the money back though, you can reclaim.
- If you wrongly start repaying before the April after your graduate... last year about £3.6 million was overpaid this way. If you started uni from 1998 onwards and were a full-time student, you should only start repayments from the April after you left your course at the earliest, REGARDLESS of how much you earn. Due to mistakes from employers and from graduates filling out forms when they start jobs, some end up having money taken out of their salary before this date.
This is the least common reason for overpaying, affecting just 22,836 borrowers last year. But as of July, just £180,000 of the £3.6 million overpaid had been reclaimed.
I've overpaid my loan – how do I get it back?
If you think you've overpaid, log on to the online repayment service to check. There you can find annual statements showing the repayments made each year – go to the 'View correspondence' section of your account.
If you believe you've overpaid, you need to ring the Student Loans Company on 0300 100 0611 (or +44 141 243 3660 from overseas), explain your situation and ask to reclaim the money you're owed. The phone lines are open at the moment but remember they may be busier than usual, as students have just returned to university.
There's no deadline to claiming – you can go back as far as you need to. But if you're claiming back money because you didn't earn over the threshold in a particular tax year, you'll need to wait till that tax year is over. If you do find you're owed and successfully reclaim, let us know at firstname.lastname@example.org.
Should I reclaim what I've overpaid?
Of course, if you reclaim money, the amount you reclaim will be added back to your student loan balance – but despite that, in most cases it IS still worth reclaiming now. Exactly how to think about this depends on which type of loan you are on:
- Plan 2 loans (students in England and Wales who started university in or after 2012). Here student loan repayments act far more like a tax than a debt – and just like a tax, if you've overpaid, it's worth getting the cash back.
With the interest rate currently at 5.6%, some may assume starting repaying early is a boon. Yet the stats show the huge majority (over 80%) of these university leavers – all but the highest earners – are unlikely to clear their loan in full in the 30 years before it's wiped. Therefore, for them extending the repayment time by starting early will simply mean paying more unnecessarily – so if you claim money back now, you WON'T end up paying it again in the future.
- Plan 1 loans (all students who started between 1998-2011, and students in Scotland and Wales since then too). Here the amount borrowed is lower, the interest rate is lower and the repayment threshold is lower – you are more likely to clear all the debt before the loan's wiped, so it's less clear that there's a long-term gain in reclaiming any overpayment now.
However, as currently the interest rate on the loan is 1.1%, and you can earn more than that in a top savings account if you're willing to fix for two or more years, arguably you'd be better off to take any overpayment back and save it. Alternatively, if you have other debts that are more costly, it's worth taking the money back to clear those. And of course there's a cashflow boon to reclaiming now. Otherwise, whether you should take the money back is a much closer decision.
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