Martin Lewis has been warning students to check if they overpaid their loan (Picture: Rex Shutterstock)
The Money Saving Expert has discovered more than a million university graduates have overpaid their student loans.
Martin Lewis and his team submitted a Freedom of Information request which found more than a million people overpaid last year – and it’s possible to claim hundreds or even thousands of pounds back.
He’s shared a handy video explaining who is due money and how to claim it back – perfectly timed amid the current cost of living crisis as Christmas approaches.
The Student Loans Company, the government-owned organisation which manages student loans and grants to UK students, revealed to the MSE team 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 explained that you’re only able to claim overpayments back if you unwittingly overpaid – if you voluntarily overpaid, you can’t claim it back.
Martin explained the main overpayment categories, saying: ‘The big one and the vast majority is 833,000 people repaid even though they don’t earn enough to repay.
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‘You’ll know you only repay your student loan if you earn over a set threshold – for most people that threshold is just over £27,000.
‘Because you pay this through the payroll, through PAYE, they take 9% of whatever is above that to go towards your student loan.
‘But let’s imagine you only worked for six months of the year, or most months you earned below that, but you’d got a bonus or worked overtime.
‘That may mean your student loan repayments were taken even though in the tax year in total you earned less than the threshold.
‘If that happened, you repaid your student loan when you needn’t have done so, so you’re eligible to take that money back.
‘In the event you paid too much in individual months, but you earned over the threshold for repaying in a year, you can’t claim back. This is only for people who in total earned under the threshold for a year.
‘165,000 people were on the wrong student loan repayment plan. If they don’t know which plan you’re on, they default to Plan 1, which is where you start repaying over £22,000.
‘Yet millions of you, the majority, are on plans where you pay over £27,000, so if you earned £24,000, and you were on the default, you would have repaid when you didn’t need to do so.’
Smaller categories include 57,000 people who had money deducted after the loan was fully repaid, and 39,000 people started repaying their loans too early – as you’re only eligible to start repaying the April after you leave university.
Millions of students could be owed money (Picture: Getty Images)
However, Martin has also weighed up the pros and cons as to whether you should reclaim that money or not.
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.
In order to claim Martin advises to collect your old payslips, payroll numbers and PAYE reference numbers, before getting in touch with the Student Loans Company over the phone or online to tell them you think you’ve overpaid.
However Martin says it could be worth getting in touch with them even if you don’t have your old documents – although not having them can slow the process down – but that you should do your own research rather than applying speculatively.
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Martin has also weighed up the pros and cons as to whether you should reclaim that money or not.