Last year, an education publication found, through Freedom of Information requests, that the government is holding on to more than £28 million in student loan over-payments.
The Student Loans Company (SLC) announced last month that it has begun trialling a system to issue automatic refunds to those who have paid too much. Since 2009, graduates have overpaid by a total of £308 million with nearly 10 per cent of that figure still unclaimed, according to statistics obtained by specialist publication, Research Professional News.
The SLC said they contacted everybody who is owed a refund, but, due to the transient nature of students and graduates, many change addresses numerous times without updating their details.
Why might you have overpaid?
Many students will have paid off their loans, but delays in the system mean they continued making repayments.
This happens because, until recently, the SLC only received updated information from HM Revenue & Customs once a year, after the end of the tax year. This meant that those who cleared their balance part way through the year would typically continue to be charged.
This can be avoided by changing your repayment method to a direct debit as opposed to having payments deducted from your payslip, at the start of the year. The SLC contacts graduates to prompt them to do this, but the company needs updated contact information in order to reach them.
The other way loans can be overpaid is if the graduate began repaying too soon. Loans are only eligible to be repaid from the April following graduation.
How do I check if I’ve overpaid
If you think you may have overpaid on your student loan, the simplest way to check is to look at your payslips, which should indicate whether or not you paid early.
The current threshold in the 2019/2020 tax year is a salary of £25,725. Prior to that, the threshold was £25,000, though you actually start repaying when your earnings go over the weekly or monthly equivalent of this threshold.
How do you claim your refund?
Graduates should call the SLC on 0300 100 0611 (or +44 141 243 3660 from overseas) and have to hand their SLC account reference number and the answer to their "secret question".
A call handler will be able to check whether there have been any overpayments and, if necessary, process the refund.
But should you take the money?
Although the prospect of a few hundred pounds might seem exciting, it might make more sense to leave the over-payment where it is.
Any money refunded will be added back to the student loan balance, meaning it will have to be repaid eventually, with interest. Graduates who can afford to be without the extra cash could be better off leaving the refund untouched.
Steven Darling of the SLC said, “We are always looking at ways to improve the service that we provide. That’s why we are starting this [automatic repayment scheme] trial, alongside other improvements to the repayment service that we’ll be introducing later this year.”