Millions of UK students have overpaid their student loans – and could be able to claim hundreds of pounds back.
Money Saving Expert Martin Lewis appeared on ITV this evening where he shared a step-by-step guide to reclaim cash.
His advice covers anyone who has graduated or left university in the last 10 or 15 years.
The Student Loans Company, the government-owned organisation which manages student loans and grants to UK students, revealed to Martin that more than a million people overpaid in the 2022-23 tax year.
That’s on top of the millions of people who overpaid in previous years, and as there is no limit to how far back you can claim, there are a lot of people who could be owed money.
However, Martin has also weighed up the pros and cons as to whether you should reclaim that money or not.
He told the Martin Lewis Money Show Live on Tuesday evening: ‘There’s no limit to how far back you can claim student loan overpayments, so there are likely millions of people who are owed money.
‘I did a video about this which went viral on social media so we’ve had an enormous number of successes.
‘This is easy to do. Many people need the cash flow, and there’s lots of people for whom taking back the overpayment doesn’t impact what you pay in future, so get the money in your pocket.’
He compares student loans to any other kind of loan, where overpayment is a good thing because you pay it off quicker and accrue less interest.
However student loans work differently, as it’s wiped after a set amount of time – usually 30 years – and only 20% of people who started university between 2012 and 2022 are likely to pay their loan off in full before that cut-off.
That means any accidental overpayments won’t reduce what you pay in future, so you wouldn’t gain any benefit from overpaying – so you might as well reclaim that cash back.
Martin added: ‘Normally when I talk about loans I’d normally suggest you pay off as much as you can so you owe it for the minimum amount of time so you pay less interest.
‘Student loans don’t work like normal loans, they work more like a graduate tax.
‘Only a quarter of people on plan 2 are likely to clear it before they wipe the debt after 30 years. Most people will just be paying 9% above the threshold for 30 years and then it’s wiped.
‘In that case, if you’ve overpaid and you take it back, it doesn’t have any impact on what you pay later so it’s absolute cash in your pocket, you may as well take it back and it also helps your cash flow.