Have I overpaid my student loan, and if so could I get a refund?

I graduated five years ago and have been in and out of jobs ever since.

I heard recently that some people are eligible for a student loan refund because they might have overpaid.

A few of my jobs have been under the repayment threshold, so I’m curious to know if I’ve accidentally had payments taken out of my pay packet.

How do I find out if I’m eligible for a refund and if I am, is it worth taking the money out or keeping it in there? 

Is there somewhere I could put it for additional tax perks?

Angharad Carrick of This Is Money replies: There has been a lot of discussion about student loan repayments because, depending on your plan, they can take a fair chunk out of your pay packet.

Given the blanket increase in bills, it’s understandable why many are looking to see if they’re eligible for a refund.

In your case, you have only been out of university for five years so it’s very unlikely you will have overpaid the full amount. 

However, there are instances when you might have accidentally paid more than you should from your monthly wage.

​How could you have overpaid?

Ian Futcher, chartered financial planning consultant at Quilter says: ‘If you graduated five years ago, you will be on Plan 2. 

Normally, on Plan 2, you will start repaying once your income is over £547 a week, £2,372 a month, or £28,470 a year.

However, sometimes payments can be deducted on the assumption that you will earn that over the course of a year. 

For example, if you are paid a bonus that puts you over the monthly threshold, you may have deductions that month. Normally, this will show on your payslip.

Angharad Carrick adds: There are also instances when you overpay as you near the end of your repayment period. 

When a customer’s final remaining balance is lower than the amount normally deducted from their pay, the system doesn’t immediately pick this up so you can end up overpaying.

This is why the Student Loans Company (SLC), the Government body which manages student finance, started giving people in their final two years of repayment the option to change to direct debit to avoid overpaying a few years ago.

You might also have been placed on the wrong plan, so it is worth checking to see if your start date corresponds with the plan you’re on.

How to apply for a student loan refund

If you think you’ve overpaid your student loan you can get in touch with the SLC, but it is worth checking through your pay slips for the last few years beforehand.

This will help give you an idea of how much you’ve paid and will help SLC see if you’ve overpaid.

Ian Futcher says: You can ask for a refund if:

• You’ve paid more than the total amount you owe,

• Your annual income was below the threshold,

• You started making repayments before you needed to, or

• You’ve repaid more than you need to because your employer had you on the wrong repayment plan.

You can ask for a refund once you know you are entitled to it by logging on to your account or contacting the Student Loans Company directly.

However, the Student Loans Company has to check your annual income, so you will only be able to check if you are eligible or claim refunds on previous tax years, or you will have to wait for the current tax year to end.

Angharad Carrick adds: There is also no need to go through a third party to do this, so it’s best to say no if you’re approached by a company that claims to be able to get you a refund.

Is it worth taking a refund?

Ian Futcher says: The choice you have then is if you want to reclaim the overpayments. Obviously, any overpayment you make will go towards paying your loan off. 

If you have only been working for five years, do you expect your earnings to go above the threshold in the next 25 years? 

Plan 2 only gets written off 30 years after the first April payment you were due to repay.

Angharad Carrick says: You’re only five years into paying off your student loan and, as you say, a few of your jobs have been under the repayment threshold.

Therefore it’s very unlikely you’ll have overpaid a huge amount and if you have, these will go towards paying off your loan, as Ian says.

If you are eligible, then you can withdraw the cash but only for accidental overpayments and not for any you did on purpose to clear your debt faster.

Ian Futcher says: If you feel it may be a while until you start repaying the loan fully, or feel you will never clear it, you could reclaim the refunds. 

If you put this money into a Stocks and Shares Isa or cash Isa, it could grow tax-efficiently for the long term, or the money could be used to bolster your emergency fund. 

All of this will depend on your situation. I would recommend seeing if you are firstly due a refund, then maybe speaking to a professional to see what is best for your personal circumstances.