According to financial guru Martin Lewis, you could be eligible to claim up to £1,000 back on your student loan repayments.
He recently explained on the Martin Lewis Money Show that many could have overpaid their student finance repayments.
This is because graduates have been paying their student loans back earlier than they need to, ahead of the April start date.
In the UK, student loans are paid back through the PAYE (pay as you earn) system alongside tax, national insurance and other deductions from your wages.
Admin errors on firms’ payrolls, as well as a lack of awareness, could be causing graduates to involuntarily repay their student loans too early.
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The annual repayment threshold for Plan 2 #studentloans is:
£25,000 per year
£2,083 per month or;
£480 per week.
.. If you’ve worked overtime and made more for the week or month, you may see a deduction on your payslip.
— SLC Repayment (@SLC_Repayment) December 3, 2018
According to the Money Saving Expert, “Anyone with a student loan who started higher education from 1998 onwards should only start repaying their student loan from the April 6 after they graduate, and then only as long as they meet the repayment threshold.
“It’s those who earned more than the repayment threshold before the April after leaving university who are most likely to have started paying too early.”
You could be one of 103,290 students who are able to get a refund on their early repayments. While the early repayments could indeed go towards paying back the loan, Lewis advised against it.
He said, “In practice student loan repayments act far more like a tax than a debt – and just like a tax, if you’ve overpaid, it’s worth getting the cash back.
“With interest rates for those who started uni in or after 2012 as high as 6.1%, some may assume starting repaying early is a boon. Yet the stats show the huge majority (over 80%) of these university leavers are unlikely to clear their loan in full in the 30 years before it’s wiped.
“Therefore for them, 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, as both the amount borrowed and the interest rates are lower, you are more likely to clear all the debt before the loan’s wiped.
“Therefore it’s arguable for some higher earners it is worth leaving it – yet it’s a very small balance, and if you need the cash now, such as to clear other debts, it’s definitely worth getting your money back.”
In the last three years, the SLC (Student Loan Company) has paid out refunds worth £729,000 to 2,190 people, an average of £333 per claimant. It seems to be a relatively simple process, as reported by some claimants.
Anthony from Basingstoke, Hampshire, graduated in July 2012 and started paying his loan back in December, five months ahead of the April date.
He said, “I can’t remember the exact details, but I remember at the time of starting my first job thinking that I had to pay my loan back and asking the staff accountant to sign me up for repayments. I don’t think I was aware that you didn’t have to start repaying until the April after you graduated.
“To get the refund, I just rang up the Student Loans Company and it was arranged by bank transfer right there on the phone.”
James from Lancaster received a refund of £500 after finding out he was eligible. After graduating in July 2016, he got a job which paid above the £21,000 threshold, and started making student loan repayments before April 2017.
He said, “I only knew about claiming the money back because a colleague told me I shouldn’t start paying until the April after graduating.
“I rang up the Student Loans Company and the person on the other end of the phone told me I had paid back too early and could keep that money as money towards my student loan, but could have it refunded if I wanted.
“To me, that money is more valuable now as a young person, with rent deposits and other payments to make, than it will be in 30 years’ time. So even if I pay back my loan in full, which I may not, I still think it was worth me claiming back.”