Millions of graduates could be eligible to reclaim hundreds in student loan repayments

Having a degree to your name is a significant accomplishment, but one unavoidable aspect of going to university is repaying the loans that funded your education.

Although graduates only begin repaying their loans once they earn above a certain threshold, Martin Lewis and his team at MoneySavingExpert have discovered that millions of graduates could be owed hundreds of pounds due to overpayments.

In a recent Freedom of Information request, they found that 'over four tax years (6 April 2019 to 5 April 2023) likely more than 4 million overpaid, and many did before and since'.

Martin Lewis has highlighted the four main reasons why people may have overpaid on their student loans, reports the Express.

Reason 1:

'You've repaid the loan in some months, despite not earning enough in the tax year'.

Graduates should only start repaying their loans once they earn over the Annual salary.

  • But student loans are deducted directly from monthly payroll, so if you earn over the monthly equivalent, it will be deducted from payroll.

  • So, despite your annual income not exceeding the threshold, some will have money deducted monthly.

  • For example, if you only work nine months of the tax year but your salary is above the threshold then this can be very common.

  • But if you receive a bonus that takes you over the annual threshold then you can't 'reclaim the excess, as you have earnt over the annual threshold'.

Below are the different plans and what the thresholds are:.

Plan 1 - Eng: 1998-2011, Wal: 1998-2011, NI 1998- today incl postgrads - threshold of £24,990/yr (£2,082/mth).

Plan 2 - Eng: 2012-2022, Wal: 2012-today - threshold of £27,295/yr (£2,274/mth).

Plan 3 - Eng: Postgrads, Wal: Postgrads - threshold of £21,000/yr (£1,750/mth).

Plan 4 - Scot 1998-today, incl postgrads - threshold of £31,395/yr (£2,616/mth).

Plan 5 - Eng 2023 onwards (won't be repaying yet) - threshold of £25,000/yr from earliest April 2026.

Reason 2:

  • 'You're on the wrong student loan payment plan by default'.

  • Unless you specifically inform your company which plan you are on, they will automatically default to Plan 1.

  • Millions are on the plan which means you only repay when you earn £27,000, but if they're automatically placed on Plan 1 then they will start paying back sooner because the threshold is lower.

  • If you find you are on the default setting then you should speak to your payroll team to fix the issue and reclaim.

Reason 3:

'You started repaying your loan too early'.

  • Graduates should only become eligible to repay their loans in the April after they graduate from their course.

  • However, if you or an employer has mistakenly got your graduation date wrong, you could have repaid too early, and are due the money back.

Reason 4:

  • 'You had money deducted after the loan was fully paid'.

  • Student loans are wiped after a set period of time, which is often after 30 years for those currently repaying but can vary.

  • However, due to PAYE (Pay-as-you-earn) timings, you could end up paying after your loan is cleared.

  • You won't need to reclaim this as it will automatically be refunded but it might be worth setting up a direct debit in the last couple of years to avoid this situation.