Martin Lewis: Are you due a student loan refund?

If you’ve graduated or left university in the last twenty years or so, you could be one of 100,000s owed money back from the Student Loan Company, according to our Money Saving Expert Martin Lewis.

This is something I first started testing the water with, back in November, and ever since I’ve been swamped with successes. There are three main ways you may be owed money back from the Student Loan Company - for full details see Martins’ ‘reclaim student loans’ guide, but in brief…

1. Did you start paying too early?

You’re only eligible to start repaying your student loan in the April after graduation – often around 9 months after leaving (if you don’t finish uni, it’s the April following leaving).

Even then you only repay if you earn over a set threshold. For those who started uni in or after 2012 (in England and Wales) that’s always been £21,000 though it rises to £25,000 next month. For those who started before that or are in Scotland or Northern Ireland it’s currently £17,775 (rising to £18,830 next month) but it has gone up each year.

The problem is employees start repaying automatically through the payroll, like tax. So if your employer has the wrong info about your uni leaving date, or simply does it wrong you may’ve started repaying early.

We did a freedom of information request that shows in the last three years alone, over 100,000 university leavers repaid too early. Yet as this could go all the way back to 1998, it’s likely there are 100,000s more.

How do you get the money back?

In a perfect world you’d check your payslips, then call up the Student Loan Company with your national insurance number, payroll number and PAYE reference. Do what you can, but if you don’t have these and think you were effected just call it on 0300 100 0611 and ask them to check.

I’ve heard of so many success like Ann who tweeted “@MartinSLewis just rang Student Loan Company and have overpaid £1,100!” and Tom who tweeted “Thank you @MartinSLewis 5 minute phone call to Student Loans Company and got £315 back from paying too early in 2009”.

2. You could’ve overpaid in a particular year

You only have to pay back your student loan if you earn over the earnings threshold in a tax year. However this is usually calculated each month when you’re paid. So £21,000 a year is £1,750 a month.

If you earned over that in a month, such as for a bonus, or you stopped work half way through the year, money could’ve been taken off you when you earned under the threshold in a year.

If that’s happened to you, you may be due money back, like Oli who said “My starting salary was £25,000, but because my employment didn't start at the start of the tax year. I was eligible to get £450 back”.

3. You could still be paying even though you've already paid off your loan

A huge 86,000 overpaid this way in 2015/16 alone. This happens because the Student Loans Company only gets told by HMRC how much you've paid once a year (though it does retrospectively calculate the interest as if you’d paid each month).

As a result, people who've finished paying off their loans can still have money deducted up to a year later – this is due to change from 2019. It will write and tell you if this has happened, but that takes time, if you think you’re impacted call it and speak to it.

In the meantime to avoid this happening, in the last 23 months a new rule means you can switch to repaying the loan by direct debit instead of through your employer – which should help.

If interest rates on student loans are high, isn’t it good that they’ve paid more off to lower the debt?

The majority of university leavers – just over 80% - who started uni in or after 2012 won’t clear their full loan plus interest in full in the 30 years before it's wiped anyway. So for you, extending the repayment time by starting early will simply mean paying more unnecessarily. So get the money back.

For those who started university before that (or if you’re in Scotland or Northern Ireland), as the amount borrowed is lower, you are more likely to clear all the debt before the loan is wiped. Therefore it's arguable for some higher earners it is worth leaving it – yet it's a very small balance. Plus the interest rate is so much lower – just 1.5%, if you need the cash now, such as to clear other debts, it's definitely worth getting your money back.