Financial expert Martin Lewis has issued an urgent warning that more than five million people in Britain could be owed hundreds of pounds in student loan refunds due to systematic overpayments.
Massive Scale of Overpayments Revealed
The founder of MoneySavingExpert.com disclosed that more than 1.1 million overpayments occurred during the 2024/25 tax year alone. This brings the total number of historical overpayments to at least five million across the UK.
One reader of Lewis's newsletter shared their surprising experience of receiving nearly £1,000 back from the Student Loans Company. Caroline, who emailed in August, expressed her amazement at the process: "I was amazed to get a £949 refund from the Student Loans Company, as I assumed I had paid the correct amount over the years."
She praised the straightforward procedure, noting that everything was sorted within a week and the money went directly into her bank account.
Why Overpayments Happen
The primary reason for these widespread overpayments stems from how the repayment system operates. Many Brits make monthly repayments even when their annual earnings fall below the repayment threshold.
For the most common Plan 2 loans - covering English students who started university between 2012 and 2022, plus all Welsh students since 2012 - the current annual threshold stands at £28,470. You only need to repay your student loan if you earn more than this amount in the tax year.
However, the system automatically deducts 9% of everything you earn above £2,372 each month through payroll. This creates situations where people who don't work a full year, such as someone earning £36,000 annually (£3,000 per month) but only working nine months, end up paying when they shouldn't.
Who's Most at Risk of Overpaying?
Several groups are particularly vulnerable to making unnecessary student loan payments:
- Part-year workers: Those who don't work the full tax year but earn above the monthly threshold during their employment period
- Variable income earners: People on commission or with fluctuating monthly salaries
- Seasonal workers: Individuals who work high-paying jobs for only part of the year
The crucial distinction lies between monthly and annual earnings. While repayments are calculated monthly, the legal requirement to repay is based on your total annual income.
Martin Lewis's warning highlights the importance for millions of Brits to check their payment history and claim what they're rightfully owed. With some individuals receiving refunds approaching £1,000, this represents significant sums that could provide welcome financial relief during the ongoing cost of living crisis.
