Martin Lewis issues warning for ‘anybody still paying off student loan’ - you might be able to get a refund
Martin Lewis explained who might be able to get a student loan refund
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Martin Lewis urged “anybody” who is still paying off their student loan to heed his warning today, after finding more than one million people have “unwittingly” overpaid.
Speaking on BBC Radio 5Live’s The Martin Lewis Podcast, he said: “My team and I put in a Freedom of Information (FoI) request to The Student Loan Company to ask in the 2022/23 tax year, how many people had overpaid their student loan.”
The founder of Money Saving Expert explained this was not referring to people who had voluntarily made extra payments towards their student loan, but instead, people who have paid “too much” student loan, “unwittingly”.
Mr Lewis continued: “The answer was one million people overpaid in the 2022/23 tax year, and that adds to millions of people who overpaid in previous years, all of whom are eligible to get their money back for overpayments.”
The Student Loan Company won't give refunds for voluntary overpayments
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The financial broadcaster went on to describe the common category that applies to people who have overpaid.
He said: “833,000 people in the last tax year alone overpaid loans because they repaid even though they did not earn enough in the tax year.”
Mr Lewis explained as there are lots of different thresholds, he would start with the most common threshold, for those who started university in England from 2012 to 2022, repay nine per cent of everything earned above £27,295 per year – known as a Plan 2 student loan.
The money expert said potential overpayments could occur when a person is not paid the same amount regularly throughout the year.
He said: “The problem occurs when you don’t have consistent earnings over a year. Let’s say you have some months where you have low earnings and some months where you get a bonus, or some months where you do overtime, or you only work six months of the year, so your pro rata pay was above £27,295 but your actual pay was below £27,295. Or you took maternity leave for half a year.
“It is very possible in that circumstance, in fact, 833,000 people who have outstanding student loans were in that case, that you paid off your student loan because you went over the monthly threshold, even though in total over the tax year, you were below the annual threshold.”
Mr Lewis says people in this situation across the UK can “get that money back”.
The money saving expert went on to point out another category of people who have overpaid the loan.
The FOI showed that 165,000 in the last tax year were on the wrong student loan repayment plan.
He said: “If you didn’t tell your firm which student loan plan you’re on, they are told by default to put you on plan one – which is where you repay on income above £22,000 – but most people are on plans where you repay on income above £27,000. In which case, you will potentially have been repaying too much.”
People in this situation could also get the overpaid money back.
Meanwhile, the Student Loan Company figures show 57,000 in 2022/23 have had money deducted after the loan was fully repaid.
Mr Lewis said: “They will automatically get that money back but you can speed it up by applying.
“Big tip from me: you can now set up a direct debit for the last two years of your repayments so that you can stop it quicker and don’t have to reclaim back.”
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Finally, the money expert warned 39,000 people in the last tax year had started repaying their loans too early.
Mr Lewis said: “You are only eligible to start repaying in the April after you left your course.”
He added: “If you misstated when your studies finished or your employer got it wrong, you could have repaid too early. Money could have started being taken too soon – and that happened to 39,000 people last year. If you’re in that circumstance, you can get the money back.”
The financial journalist also pointed out that Government figures show more than three-quarters of people on plan two loans won't clear their student loans in full before they are wiped after 30 years.
He continued: "In which case, overpaying relatively small amounts won't actually reduce what you'll pay in future. So you don't gain by the overpayment, so you may as well have it back in your pocket.
"The ones who will gain by overpaying are those who will clear the loan within 30 years [on plan two]."
The Martin Lewis Podcast is available to listen to on BBC Sounds.