Student Loan Overpayments
Are you due a refund?
Many have student loan repayments automatically deducted from their wages each month, and it's easy not to notice and assume all is well. Yet 10,000s accidentally overpay their student loans each year – and if you have, you can reclaim.
A MoneySavingExpert.com investigation last December found that 100,000 people in the three previous tax years had started repaying their loan too early – and there are other ways you can unintentionally overpay too. Many can reclaim £100s in just a few minutes.
In this guide
This guide only covers those who went to uni in 1998 or later. The following only applies to income-contingent student loans – ie, it only applies to those who started university in 1998 or later.
The Government has released its Augar report on further and higher education, which has been influenced by suggestions from MSE and Martin Lewis. Read Martin's editorial comment for more in-depth analysis of what the suggested changes really mean.
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'I reclaimed £1,100 in five minutes'
Before you start reading this guide, here is some inspiration from people who started paying their student loan back early and then reclaimed. We revealed that 100,000+ had started paying early in our MSE News story in December 2017.
Since then, successes have come flooding in. Based on the stats we obtained from the Student Loans Company (SLC), the average overpayment was about £330. But some, such as Mekila, who left the University of East Anglia in 2008, have reclaimed much more:
I got £1,100 from the SLC for early repayments before April 2009. It took literally five minutes – it was so quick. The person on the phone looked up and told me how much I was due, and all I needed were my bank details for them to transfer the money across. I'm moving house next week and will be needing new carpets, so this will be a big help. I thought 'oh my God!' What a bonus. I can't believe it.
We also heard from Lyndsey, who told us:
Thanks to watching Martin Lewis's programme last night I contacted the SLC and have got a refund of £706 as I had started paying straightaway. Great just before Christmas.
And Michael said:
Me and my partner just phoned – 30 minutes later and we are due back £810 between us! Thank you so much for the advice. We can now pay some of our wedding and new kitchen off.
I spent 15 minutes on the phone and got £555 back for overpayments on my student loan. Most was because of my maternity leave. Thanks so much, couldn't have come at a better time.
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Make sure you don't repay too early - and reclaim if you do
It may sound odd, given how cash-strapped recent graduates often are. But many accidentally overpay their student loan immediately after leaving university, by starting repayments earlier than they need to.
If you started uni from 1998 onwards and were a full-time student, you should only have started repayments from the April after you left your course at the earliest, REGARDLESS of how much you earned.
Figures released to MoneySavingExpert under the Freedom of Information Act in November 2017 revealed that more than 100,000 university leavers in the last three years alone started repayments before this – and so can reclaim as a result. This isn't the fault of the SLC though – usually it's down to an admin error on the part of the borrower or their employer.
Unless you're self-employed, student loans are paid back from your wages via the Pay As You Earn (PAYE) system – alongside tax and national insurance – if you earn over a certain threshold.
There are several reasons why you may start repaying early, the main ones are:
- Making a mistake whilst filling in the student loan section of the HM Revenue & Customs starter checklist form. Say, if you answered the question about when you finished your studies incorrectly.
- A mistake from your employer. Even if you're sure you've filled in the paperwork correctly, it could be that your employer mistakenly set you up to start repaying too early.
To avoid having to retrospectively reclaim, take care filling out the HMRC starter checklist form, and then, when you get your first pay slip after graduating, have a thorough read to make sure student loan payments aren't being deducted.
Although you should only start repayments from the April after you leave your course at the earliest, REGARDLESS of how much you earn, it's those who earn more than the student loan repayment threshold before the April that are most likely to start repaying too early.
The thresholds vary depending on when you started your course, and where you lived before university – you repay 9% of what you earn above the threshold:
- Started uni in or after 2012 and from England or Wales? The threshold is £25,725 a year in the 2019/20 tax year, although prior to this it was £25,000 – what counts though is how often you're paid, so you repay when your earnings go over the weekly or monthly equivalent of this threshold.
- Started uni 1998-2012 (or since and from Scotland or Northern Ireland)? The current threshold's £18,935, but it's changed every year since 2012. What counts is the threshold when you left uni – see a list of the different thresholds. Again, how often you were paid is crucial, so you'd have made repayments when your earnings went over the weekly or monthly equivalent of the threshold (though if your total earnings for the tax year didn't meet the annual threshold, you could have reclaimed what you'd repaid).
It's worth noting that when it comes to location, what counts is where you lived before going to university. For example, if you lived in Lancaster but went to university in Edinburgh, you're 'from England' for the purposes of your loan.
Exactly how to think about this depends on which type of loan you are on.
- Plan 2 loans (Students in Eng & Wales who started University 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. While the interest rate is as high as 6.3%, 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. And therefore taking the overpayment back, won’t result in you paying any more in future – so it is a pure gain – do it.
- Plan 1 loans (All student who started 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 there is less of a long term gain taking back any overpayments.
However as currently the interest rate on the loan is 1.75%, and you can earn more than that in a top savings account, arguably you’d be better off to take any overpayments back and save it. Alternatively if you have other debts that are more costly it’s worth taking the money back to clear those. Otherwise those whether you should take the money back is a much finer balance here.
The easiest way to check if you paid back part of your loan early is if you have payslips. These will usually show whether or not deductions were made for student loan repayments. If you don't have them, you can call the SLC to check.
To reclaim, simply call the SLC on 0300 100 0611 (or +44 141 243 3660 from overseas). Just say you think you started paying back your student loan before the April after you left uni, and you would like to reclaim the cash. If you graduated after April this year, make sure to say that you want to stop making repayments until next April - when if you are earning over the repayment threshold, you'll be obliged to make repayments.
The SLC says the process will be smoother if you have your payroll number, PAYE reference number and payslips from when you were overpaying to hand, but if not, just call it anyway – many have successfully reclaimed without paperwork.
There are no restrictions on how far back you can claim, so while many reclaiming will be recent graduates, there's nothing to stop you doing this even if you overpaid years ago. The SLC even says in theory you could ring and reclaim AFTER repaying your loan in full, although it's not clear how this would work in practice and this could be an admin headache for you, as you would only then have to resume repayments.
Since 2012, some part-time students have been able to get student loans.
If you're a part-time student, the same thresholds apply as if you were a full-time student. But you're required to start repaying from the April four years after your course started, or the April after you leave your course, whichever comes earlier.
If you did a first degree and later went back to university to study for another qualification, you would still have been due to start repaying your loan from the April after you finished your FIRST course.
If you studied an integrated master's degree (where the master's degree is part of the initial qualification), you would have been due to start repaying the April after you graduated or left the course, not the April after you finished the bachelor's element of the programme.
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How to reclaim if your annual income is under the threshold
It's also possible to repay too much of your student loan within a single tax year.
This usually happens if your earnings vary throughout the year, so at one point you're earning an amount above the repayment threshold, but your total annual income is less than the threshold.
This might happen if:
- You only work for part of the year.
- You take on extra shifts in a specific month.
- You move to a higher or lower paid role.
- You earn a bonus which puts you over the threshold for that month only.
- You go on maternity or paternity leave for part of the year.
When you make your repayments via PAYE, student loan contributions are taken when you're paid – whether this is 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, you'll pay back your loan every month your pay goes over the monthly equivalent of your repayment threshold.
However, if over the course of a tax year (which runs from 6 April to 5 April) your total income is less than the threshold, you can reclaim.
Again, the annual thresholds vary depending on when you started your course and where you lived before university, and you repay 9% of what you earn above the threshold:
- Started uni in or after 2012 and from England or Wales? The threshold for the 2017/18 tax year was £21,000/yr, for the 2018/19 tax year it was £25,000/yr, and this tax year it is £25,725.
- Started uni 1998-2012 (or since and from Scotland or Northern Ireland)? The threshold for the 2017/18 tax year was £17,775/yr, the threshold for 2018/19 was £18,330/yr, and for this tax year it's £18,935 but it has changed every year since 2012, and what counts is the threshold when you left university – see a list of the different thresholds.
How to check if you've overpaid your student loan
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. You need to do this AFTER the tax year has finished.
Before ringing, check your old payslips. But if you don't have these and think you may have overpaid, it's still worth giving it a go, though it may take longer.
We've heard of successes on this too, for example from Oli:
My starting salary was £25,000, but it was the amount I was paid in the tax year that mattered – it was less than £17,500 because my employment didn't start in April, at the start of the tax year. I was eligible to get £450 back.
The SLC says having your P60 and payslips to hand will make this process as easy as possible.
If you don't have these, it's still worth calling, as the SLC can get the info on how much you earned from HMRC, but this will make the process longer.
There's no deadline on reclaiming – so you can go back as far as necessary.
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How to reclaim if you repaid AFTER clearing your debt
The SLC only receives an update on how much you've paid towards your student loan from HMRC once a year.
As a result, graduates who've actually finished paying off their loans may still have money unnecessarily deducted from their pay packets because the SLC doesn't know they've finished paying them off.
There are moves to fix this – the SLC now lets you make your last two years of repayments via direct debit, and a system due to be launched in 2019 is supposed to stop repayments automatically once a loan's been fully paid off. But for the time being it's a problem for some – and you can reclaim if affected.
How to check and reclaim
If you overpay, the SLC will write to tell you, though it can take a while for this info to filter through from the taxman (and you'll also need to make sure the SLC has your most recent address).
If you do get a letter telling you you've overpaid, you'll just need to call on 0300 100 0611 (or +44 141 243 3660 from overseas) to arrange your reclaim.
Alternatively, if you think you've overpaid and don't want to wait, you can call the SLC on the same number. You'll need your payslips or P60s from the past two years to hand.
If you contact the SLC proactively, you'll most likely be asked to supply evidence in writing, by sending photocopies of your payslips to Student Loans Company, 100 Bothwell Street, Glasgow G2 7JD – though this will be confirmed when you call.
The SLC now allows those in the last two years of their loan repayments to repay via monthly direct debit, to avoid overpaying. Because you're paying directly to the SLC, you avoid the communication breakdown between it and the taxman.
When you enter the last two years of your repayments, the SLC will write to you about this, so you can set up a direct debit. If you're already within the last two years of repayments it should also write to you – but if it hasn't, ring it on 0300 100 0611 (or +44 141 243 3660 from overseas). See our Student loan direct debit repayments MSE News story for full info.
There's no deadline on reclaiming – so you can go back as far as necessary.
If you voluntarily repay you can't later reclaim
This guide is all about helping people who've accidentally overpaid their student loan, because they've started repaying too early, overpaid in a year or have repaid after clearing their debt.
Yet it's also possible to voluntarily pay extra money towards your student loan, via a one-off or regular monthly payment.
If you choose to pay extra towards your student loan, the SLC says you can't later claim this money back – so think very carefully about whether you want to repay more than the required minimum.
Should I CHOOSE to pay off my student loan early?
As Martin says above, think long and hard before doing this. It usually ISN'T worth it, as many will never repay their student loan in full. You should usually pay off other debts first and even if you're otherwise debt-free, it may be better to save.