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Martin Lewis' warning to former students as MSE reveals over one million people WRONGLY overpaid their student loans last year

All former students with student loans should check if they can reclaim £100 or even £1,000s, (MSE) founder Martin Lewis has urged. It comes after an MSE investigation found that over a million people wrongly overpaid their loans last year. Here's what you need to know and how to reclaim.

This article was included in our weekly email on 10 October 2023.

Student loan repayments work more like a tax than a loan - you only repay once you earn enough and in proportion to earnings. And just as millions unwittingly overpay tax (are you owed tax back?), many university leavers unwittingly pay too much off student loans. Our new Freedom of Information request reveals that in the 2022/23 tax year, over a million former UK students OVERPAID, adding to millions more who had in past years.

Some get £100s back just with a quick call, others may have to push harder, as Fiona emailed: "Thank you so much. I knew something wasn't right when I lodged my tax returns, and reading Martin's article was the catalyst for a sustained attempt to work out what had happened. Finally, I received £3,773 back." Our Reclaim student loan overpayments guide has step-by-step instructions on how to get your money back, but here's a heads-up...

The most common reasons why people overpaid their student loans

It's often due to incorrect details or processing by you, your employer or the Student Loans Company. Here are the figures for 2022/23...

  • 833,000 repaid loans despite not earning enough in the tax year. Student loans are repaid at 9% of everything earned over the ANNUAL threshold (£27,295 for most, but it varies by the 'plan' - see what's my repayment threshold). However in practice, repayments are taken from the payroll monthly, if you earn over the MONTHLY equivalent threshold (£2,274 for most).

    So those with variable incomes or commissions, or who had some time out of work in the tax year, are likely to have paid for their student loan in some months when their annual earnings aren't high enough, so can reclaim. PS: if you earnt over the annual threshold, but paid too much for the year due to some high earning months, sadly you can’t reclaim then.

  • 165,000 were on the wrong student loan payment plan. If you've not told your firm which plan you're on, the Government tells it to assume you've a Plan 1 loan where you repay on income above £22,015 a year yet millions are on plans where you only repay over £27,000 a year- so if the default setting is then used, you'll have overpaid.

  • 57,000 had money deducted after the loan was fully repaid. After a set time the loan is wiped, often after 30 years, but again it depends (see When will my loan be wiped?). However, you could still repay even after your loan is cleared due to PAYE timings - it will pay this back automatically, but that can take time. To prevent this, you can set up a direct debit for the last two years of your repayments.

  • 39,000 started repaying their loans too early. You are only eligible to start repaying in the April after you left your course. If you misstated when your studies finished or your employer got it wrong, you could've repaid too early.
  • Full breakdown of overpayments in the past two years

    How many people wrongly overpaid their student loans in the past two years 

    Reason for incorrect overpayment (1) How many people overpaid in the 2022/23 financial year How many people overpaid in the 2021/22 financial year
    Loan repayments taken before students' repayment date 39,013 28,721
    Deductions continued after the loan was fully repaid 57,136 51,912
    Students were on the wrong repayment plan
    - 98,146 Plan 2 students overpaid because they were recorded as being on Plan 1
    - 66,960 Plan 4 students overpaid because they were recorded as being on Plan 1
    - 98,848 Plan 2 students overpaid because they were recorded as being on plan 1
    - 69,913 Plan 4 students overpaid because they were recorded as being on Plan 1
    Students repaid their loan despite not meeting the minimum earnings threshold to do so 833,213 998,476
    Total number of people who wrongly overpaid 1,094,468 1,247,870

    (1) For our full guidance on why you might have wrongly overpaid, see our Student loan overpayments guide. Total incorrect overpayments equate to millions of pounds. 

Should you claim the money back if you've overpaid your student loan?

Overpaying on normal loans is a good thing, it means you clear the debt quicker and repay less interest. Yet student loans don't work like normal loans. 

Many people are on Plan 2 loans (for example, 2012 to 2022 university starters from England) with its current 7.3% interest rate.

So on the surface, overpaying may look a good idea. However, the Government's own stats show over three-quarters of people won't clear these loans in full before they wipe after 30 years.

If so, overpaying these smaller amounts won't usually actually reduce what you will pay in future, so you don't gain by overpaying (the very highest earners who will clear the loans in time will gain). This works differently for other plans - see Should I reclaim overpayments? for plan-by-plan details.

How to reclaim? It's usually pretty simple and you can go as far back as you like

If possible, gather old payslips, your payroll number and a PAYE reference number. But if you don't have those, don't let it put you off, this can often be done in a phone call.

There's no time limit here either, so even if this was a decade ago you can still do it. Full details in how to reclaim student loan overpayments.

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