Financial expert Martin Lewis has issued an urgent call to action, revealing that up to five million people in Britain might have overpaid on their student loans and could be owed a significant refund.
The founder of MoneySavingExpert made the declaration on his ITV programme, The Martin Lewis Money Show, describing the situation as "big, for many people" and urging graduates to investigate their finances immediately.
Why Are Millions Owed Money?
Lewis explained that the core of the problem lies in the discrepancy between the annual repayment rules and the monthly Pay As You Earn (PAYE) system used by employers. You are only legally required to repay your student loan if your total income for the entire tax year (April to April) exceeds the annual threshold for your repayment plan.
However, the PAYE system deducts payments monthly based on what you earn in that specific month. This can lead to overpayments if your annual income ends up being lower than the threshold, even if you earned over the monthly limit for part of the year.
Common scenarios where this occurs include:
- Starting a job part-way through the tax year after graduating.
- Taking maternity or paternity leave.
- Experiencing a period of unemployment or a substantial drop in income.
- Switching to part-time work or taking a career break.
The Plan 2 Loan Anomaly
Lewis focused particularly on those with Plan 2 student loans, which covers the majority of students in England who started university between 2012 and 2022, and students in Wales from 2012 onwards.
For these individuals, the current annual repayment threshold is £28,470. Repayments are set at 9% of any income earned above this figure.
To illustrate the issue, Lewis provided a clear example: "If you graduate and start a job in July on a salary of £36,000 a year (£3,000 a month), you would repay around £56 a month for the remaining nine months of the tax year.
However, your total earnings for that tax year would only be £27,000, which is below the £28,470 threshold. This means you shouldn't have repaid anything, and you can claim back the £508 you paid."
How to Claim Your Student Loan Refund
If you suspect you might have overpaid, the process to check and claim is straightforward.
The first step is to contact the Student Loans Company (SLC) directly on 0300 100 0611. An advisor can check your records and confirm if you are owed a refund. If you are, they can often process the payment for you over the phone.
Alternatively, if you have your login details, you can submit a refund request directly through the SLC website.
Lewis's advice highlights a systemic quirk that could put hundreds, sometimes thousands, of pounds back into the pockets of millions of graduates. With the potential for such a large-scale financial redress, checking your student loan account is a simple step that could yield a very welcome surprise.
