Anyone who has taken out a student loan has been urged to check how much they've repaid as they could be owed a hefty refund.
Martin Lewis, the MoneySavingExpert founder, urged all those with student loans to check if they could be owed money as over a million people have overpaid their loan repayments in the last tax year. On Tuesday's episode of his ITV program, the Martin Lewis Money Show, he revealed how some students have had hundreds of pounds refunded to them after contacting the student loans company.
The 51-year-old explained how people can check if they are owed money — with many viewers already claiming to have gotten money back. He stated there is no limit on how far back you can reclaim student loan overpayments and highlighted four reasons why you may be eligible.
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The first reason is being on the wrong student loan payment plan. He revealed that 165,000 people overpaid last tax year because of this. Most students are on Plan 2, but if your employer doesn't know which plan you're on, they default to Plan 1.
- Plan 1 is for students who started university in England or Wales between 1998 and 2011. On this plan, you repay 9% on anything above just over £22,000
- Plan 2 is for those who began their studies between 2012 and 2022, and they'll pay 9% on everything over £27,295, he explained. He also mentioned other plans, including a new Plan 5, but that's for students still studying
He gave an example of how someone might overpay on their loan if they're put on the wrong plan: "Let's say someone should be on Plan 2, but the employer has defaulted to putting it on Plan 1 and they are earning £30,000. They should be paying 9% on everything above £27,295 – which is 9% of £2,705, which is £243, that's how much they should repay."
"But, they're paying 9% above £22,000 which is 9% of £8,000 which is £719. So they would have repaid £719, but they only needed to repay £243." He said that was the first check to make.
He then highlighted the second way you may be owed money, which he called "the big one". This is for people who repaid the loan when they didn't earn enough to repay it. He said 833,000 people did this just in the last tax year alone.
He explained that folks with a fluctuating income might see loan repayments taken out during months when their income is high, even if their yearly income is below the threshold. He said: "You only need to repay if you earn over an annual threshold for the tax year." He added: "Your repayments are taken by PAYE based on your monthly income. Many people have variable income where they earn over the threshold in some months but they earn under the annual threshold."
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He clarified if your yearly income stays below the threshold at the end of the tax year, then you should be able to claim back any payments you made on your loan. But he warned: "If you're over the threshold you can't reclaim if you have variable income, which is quite frustrating." This means that even if you're just above the annual threshold, your repayments may still be higher than expected if your income is particularly high some months.
According to GOV.UK, you can ask for a refund on your student loan repayments if:
- You’ve paid more than the total amount you owe
- Your annual income was below the threshold
- You started making repayments before you needed to
- You’ve repaid more than you need to because your employer had you on the wrong repayment plan
If you've made a repayment and your income was below the annual repayment threshold, you can now apply for your refund online. You can download a form from GOV.UK here. For all other reasons, you will need to call the Student Loans Company.
* This article was crafted with the help of an AI tool, which speeds up Daily Star's editorial research. An editor reviewed this content before it was published. You can report any errors to [email protected]
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