More than 850,000 graduates are owed student loan refunds after analysis found many people had been making ‘incorrect’ repayments.
As outlined on the UK government website, how much students repay from their loan depends on their income – the amount they earn, including bonuses, overtime and other factors, before tax and other deductions.
“You’ll repay a percentage of your income over the ‘threshold’ for your type of loan, depending on how often you get paid,” it says.
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Currently, English and Welsh graduates who started a course in or after September 2012 begin paying their loans back when they earn £27,295 or more a year – something that’s known as Plan 2 loans.
However, following changes announced in February last year, English students starting university courses in 2023/24 will have to start paying back the money back once they are earning £25,000.
According to figures obtained by website Save the Student, which provides ‘free, impartial advice to students on how to make their money go further’, a total of 856,475 graduates in the UK made student loan payments in the 2021/22 financial year despite earning below the repayment threshold.
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The new figures, which were secured through a Freedom of Information (FOI) request to the Student Loans Company (SLC), found that just two percent (18,136) of those who made overpayments for this reason have claimed a refund.
The data also suggests that 203,064 graduates repaid their student loans under the wrong plan type, while 39,000 accidentally made early repayments and 52,300 continued to make repayments after clearing their balance in 2021/22.
Graduates who make repayments after clearing the balance are supposed to be contacted by the SLC or issued with a refund automatically, but according to Save the Student, this is not always the case.
Tom Allingham, Save the Student’s money expert, said: “I’d strongly urge all graduates to check if they’re owed hundreds of pounds in the form of a student loan repayment refund.
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“In the case of graduates repaying their student loans despite earning below the threshold, this tends to be because their salary has varied throughout the year.”
He added: “If your total earnings at the end of the financial year are still below £27,295, you’re entitled to a refund of any repayments you made.
“But whatever the reason, if you believe you may have made incorrect student loan repayments, it’s usually worth claiming a refund.
“Graduates with Plan 2 loans in particular should seek to do this, as around 80 percent of them are expected to have some or all of their balance wiped by the government after 30 years. As such, there’s little danger of graduates claiming money back, only to repay it again later.”
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The SLC claimed the 856,475 ‘below threshold payments’ are not taken by mistake, saying student loan repayment is based on annual earnings, with deductions taken each pay period where the earnings are above the threshold – usually weekly or monthly.
It said it can only refund those who earn less than the annual threshold at financial year-end, as per the regulation.
A spokesperson for the SLC said: “SLC administers student loan repayments as per the regulations set by the UK and devolved governments.
“Deductions are taken by the employer in every pay period, generally weekly or monthly, when repayer earnings are higher than the threshold for the pay period. If a repayer is having repayments taken too soon, or they are placed on the wrong plan type, they should contact their employer, to correct this error.
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“The overwhelming majority of repayments are taken correctly and SLC routinely refunds customers who have over repaid. In the last year, SLC automatically refunded 77,973 customers and will continue to do so on a monthly basis.
“Any customer who has had a deduction in a previous tax year and whose earnings were below their annual repayment threshold should check their online account, and if they are eligible for a refund, contact SLC.”
Featured Image Credit: Mark Draisey Photography/John Lamb/GettyTopics: UK News, Money, Students