Do you think you may have overpaid your student loan? If so, you’re not the only one…
Overpaying Student Loan
According to data obtained by Money Saving Expert under the Freedom of Information Act from the Student Loans Company (SLC), in the 2022/23 financial year, 833,213 former students repaid their student loan despite not meeting the minimum earnings threshold.
There are a number of reasons why you might end up making overpayments towards your student loan, so let’s have a look at these now.
You Didn’t Meet the Repayment Threshold
We only start repaying our student loan once we earn over a certain amount of money per tax year. The repayment threshold is determined by which Plan you are on.
- Plan 1 student loan – you repay when you earn over £24,990 a year
- Plan 2 student loan – you repay when you earn over £27,295 a year
- Plan 4 student loan – you repay when you earn over £31,395 a year
- Plan 5 student loan – you repay when you earn over £25,000 a year
To start repaying your student loan, your income has to be over the repayment threshold for the tax year (which runs from one April to the next). However, you may find that repayments have been deducted from your salary despite your earnings not meeting this threshold.
Student loan repayments tend to be taken from your payroll monthly, but you shouldn’t start repaying your loan until you earn above a certain amount per financial year. There are a number of instances where you may end up accidentally paying your student loan despite your total yearly earnings being below the threshold:
- You lose or quit your job
- You work shifts that vary
- You have a change in job role which means a change in pay
- You work part of the year but not the full year
- You go on maternity or paternity leave
- You earn a bonus one month
Your Loan is Already Repaid
While many of us never fully pay off our student loan, this is not the case for all! You may have continued paying towards your loan after it was already fully repaid.
To help avoid this happening, the SLC lets you use direct debit to make your last two years of repayments, but those who did not sign up to make payments this way may end up still accidentally overpaying.
You’re on the Wrong Repayment Plan
When you start university will then determine what repayment plan you are on. If you started an undergraduate course before 1st September 2012, you will be on a Plan 1 loan, and if you started between 1st September 2012 and 31st July 2023 you will be on a Plan 2 loan.
Plan 5 loans are for those starting university after 1st August 2023 and Plan 4 loans are for Scottish students. Those who studied for postgraduate masters or doctoral courses will be on Postgraduate Loan plans.
Maybe your employer has made a mistake, assuming you’re on a different Plan to what you are, or maybe you made an error when filling out the student loan section of the HMRC starter checklist form. For whatever reason, the SLC may have the wrong year on record for when you started university, meaning you are on the wrong repayment plan.
It can make a big difference if you are paying for the wrong plan. You can find out more about what you should be repaying on your loan on the government website.
Getting Your Overpayment Refunded
You can use this form to ask the SLC for a refund for any student loan repayments you have made in previous tax years when your yearly income was below the annual repayment threshold. For refunding overpayments that resulted from other reasons, you will have to contact the SLC using the contact details here.