You are here: Home - Credit Cards & Loans - News -

Have you overpaid your student loan?

Written by: Emma Lunn
In 2020/21, 45,264 graduates overpaid their student loans, because their payments didn’t stop once the debt was settled.

In total £16.989 million was overpaid, with the average overpayment standing at £375, according to the Student Loans Company (SLC).

The average overpayment has dropped 38% since 2015/16, and the number of people affected is down almost a half (49%), after the Student Loans Company changed the system.

Massive overpayments in previous years owed much to the fact that repayments are made through PAYE and until April 2019, HMRC only sent SLC details of repayments once a year, so in the gap between repaying in full and sending the data, millions of people overpaid.

From April 2019 it started sending student loan information reported by employees once a week, and for people who are paid monthly by PAYE it sends it monthly.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “On the one hand, student loan overpayment isn’t as rife as it was in 2015/16, when more than 88,000 people overpaid an eye watering £53.5m. On the other hand, graduates are still handing over millions of pounds of their hard-earned cash that they don’t actually owe.

“Part of the problem is that people took these loans out so long ago that their contact details may well have changed, so the protections the SLC introduced to avoid overpayments won’t help them at all. All the tips on avoiding overpayments will end up sitting on the mat of a house they used to live in, or clogging up the inbox of an email account they no longer use.”

How to avoid overpaying your student loan

The easiest way to avoid paying too much is by setting up a direct debit at some point in the final two years of the loan term. The direct debits automatically stop as soon as the money is repaid. However, only one in five people do this.

You should get a letter three months before your repayments are due to finish asking you to contact the SLC and repay the rest in full. At this point HMRC will contact your employer and get it to stop making deductions from your pay.

If you end up paying too much, the SLC will automatically refund anything up to £750 to the bank account it has on file. If you have overpaid £25 or less you can contact the SLC and ask for a refund.

The Student Loans company writes to you a year before the balance is repaid encouraging you to join the scheme. It sends up to two follow-up emails and texts – but only 21% of people sign up.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

Low-income pensioner? You could gain £3k top-up

Hundreds of thousands of retirees struggling with a low income are missing out on Pension Credit worth £3,300...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week