Hundreds of thousands of graduates could be owed refunds after making “incorrect” student loan repayments.
Save The Student, a website providing free, impartial advice to students on finance, found that over 850,000 graduates made unnecessary student loan repayments during the 2021/22 financial year. The majority have not claimed a refund.
The new data, acquired through a Freedom of Information (FOI) request to the Student Loans Company, finds that the total value of these erroneous payments exceeded £100m.
Out of the 856,475 graduates that overpaid, just two per cent have claimed a refund. The figures further identify that 39,000 graduates mistakenly made early repayments, with over 50,000 continuing to make repayments despite having cleared their balance.
Elsewhere, over 200,000 repaid their student loans debt under the wrong plan type.
Typically, graduates who have cleared their balance and have continued to make payments are automatically issued a refund, but Save The Student has warned that this isn’t always the case for others that overpay.
At present, UK universities can charge a maximum of £9,250 per year for an undergraduate course, with graduates obligated to repay tuition fee loans, maintenance loans and postgraduate loans.
Over 850,000 graduates made unnecessary student loan repayments during the 2021/22 financial year— (PA)
Methods of repayment vary depending on whether an individual is employed or self-employed, with repayments automatically deducted from salaries alongside tax and National Insurance. Elsewhere, HMRC will calculate the annual amount owed as a tax return is filed.
How can I claim a refund?
To check eligibility in claiming a refund, Save The Student advises checking old payslips and cross-referencing these against the repayment rules and thresholds for that year.
Graduates who no longer have access to old payslips can call the Student Loans Company to check. “In the case of graduates repaying their student loans despite earning below the threshold, this tends to be because their salary has varied throughout the year”, said Tom Allingham, Save The Student’s money expert.
“Take England and Wales, for example, where the Plan 2 repayment threshold is currently £27,295 a year. Depending on how often you’re paid, repayments are made in accordance with the monthly or weekly equivalents of this threshold. So, if you work extra shifts, receive a bonus or move to a higher-paid role part-way through the year, you may start making repayments.
“However, if your total earnings at the end of the financial year are still below £27,295, you’re entitled to a refund of any repayments you made.
“But whatever the reason, if you believe you may have made incorrect student loan repayments, it’s usually worth claiming a refund. Graduates with Plan 2 loans in particular should seek to do this, as around 80 per cent of them are expected to have some or all of their balance wiped by the government after 30 years. As such, there’s little danger of graduates claiming money back, only to repay it again later.
“Graduates with other types of student loans should also consider requesting a refund. While they’re more likely to repay their loans in full at some point, reclaiming a few hundred pounds could make a huge difference during a cost of living crisis. That said, I would advise these graduates to consider how likely they are to repay their loan, and if they’d rather forgo a refund and clear their balance earlier.”
