A staggering 23 million people overpaid their student loan last year. How do you find out if you’re one of them, and what should you do if you are? If you haven’t overpaid, how can you prevent this from happening in the future? Here, I explain.
What the stats say
The Student Loans Company has released details of overpayments in the 2019/20 tax year and it’s made for interesting reading. In total, 23 million people overpaid their student loan in the last financial year and the average overpayment was £424.
According to the research, 54,516 graduates overpaid their student loans because their payments didn’t stop once the debt was settled. Bit it’s not all doom and gloom; the average number of people that have overpaid has dropped by 30% over the past four years and the number of people affected is down by 38%. This is because the Student Loans Company changed the system. However, clearly there are still issues.
What should I do?
If you’re worried that you might have overpaid, then contact the Student Loan Company today. It will save you time if you’ve done your calculations beforehand, so check your balance on the online portal and have a look at your P60 form.
How can I avoid this from happening to me?
The easiest way to avoid paying too much is by setting up a direct debit at some point in the final two years of the loan term. At the moment, only one in five people do this. So if you want to avoid overpaying, don’t ignore messages from the Student Loans Company about the direct debit scheme.
Understandably, some people disengage from the Student Loan Company, but you should check any communications that they send.
Sarah Coles, personal finance analyst, at Hargreaves Lansdown, said: “When someone has been repaying a debt for this long, they start to resent it, so they’re not inclined to open mail from the Student Loans Company or read their texts and emails. And if they get the one asking for full payment of the rest of the loan, they might be so cross they’re asking for it all at once, that the potential benefit pales into insignificance.”
You should also make sure that the Student Loans Company has your correct details, including your postal address, email and mobile number. If you do this, you should catch one of the the messages about how to avoid overpaying. Make sure they have your bank details on file too, as this will mean that the Student Loans Company can automatically refund any overpayments. Finally, be sure to sign up to the Online Repayment Service. This is the best way to check if you’ve overpaid and if you need to request a refund.
Could I be due a refund for any other reason?
When I lost my job due to the pandemic, I contacted the Student Loans Company, because I believed that I’d overpaid my student loan during the previous tax year. I went on maternity leave in December 2018 (returning in January 2020) and this meant I was under the repayment threshold for the 2019/20 tax year, but I still paid back £458. Now I owed that money, but I asked for it back. I did this because I’d lost my job and I wanted that extra cash in my savings.
My P-60 form showed me what I’d earned overall and it confirmed my Student Loans Company repayment amount. Armed with this information, I called them. I was on the phone for 11 minutes and the money was refunded into my bank account within 15 days.
If you have overpaid, but you still owe money, then you may decide to leave the money where it is, as the money is going against your overall student debt. However, you are within your rights to ask for it back if you need that cash.
This issue with student loan overpayment highlights the importance of being on top of your finances. Nobody wants to overpay, so try to ensure that you’re auditing your finances regularly. That way, you’ll be able to prevent or rectify errors like this from occurring.