UK graduates paid back £100m in student loans while below threshold

Hundreds of thousands of UK graduates made unnecessary repayments on their student loans last year, worth more than £100m, while earning below the repayment threshold, according to an investigation.

More than 850,000 graduates made payments they should not have done in 2021-22 because their income was too low, according to data obtained through a freedom of information request to the Student Loans Company (SLC).

A further 50,000 graduates continued to make repayments after clearing their balance, 39,000 accidentally made repayments before they were required to, while more than 200,000 repaid their student loans under the wrong plan type.

In each of the four groups of mistaken repayments, the incidence was higher in 2021-22 than the previous year.

The data was revealed by the student money website, Save the Student. Tom Allingham, Save the Student’s money expert, said: “I’d strongly urge all graduates to check if they’re owed hundreds in the form of a student loan repayment refund.”

The bulk of the mistaken payments are deductions from graduates whose income fell below the repayment threshold of £27,295. Just 2% of those affected have claimed a refund.

There are concerns that government plans to reduce the repayment threshold to £25,000 from September will mean graduates on lower incomes will be unable to afford unnecessary repayments.

The National Union of Students said it was “deeply concerned” and that it was yet more evidence that the current system is failing students. “Any over-repayment is money unfairly taken from student’s pockets,” said Chloe Field, NUS vice president for higher education.

“NUS has long documented the suffering students have experienced in recent years, due to the pandemic and cost of living crisis, and there must now be an urgent review of repayment processes and an assessment of how many students have been adversely affected.”

While graduates who continue to repay their loan after clearing the balance are usually contacted by the SLC or are automatically refunded, the same generally isn’t true for those who overpay for other reasons, according to Save the Student.

Allingham said graduates who repaid their loans despite earning below the threshold tended to do so because their salary had varied throughout the year. “Take England and Wales, for example, where the Plan 2 repayment threshold is currently £27,295 a year.

“Depending on how often you’re paid, repayments are made in accordance with the monthly or weekly equivalents of this threshold. So, if you work extra shifts, receive a bonus or move to a higher-paid role part-way through the year, you may start making repayments. However, if your total earnings at the end of the financial year are still below £27,295, you’re entitled to a refund of any repayments you made.”

He added: “What’s more, students from England starting uni this September will end up graduating with a lower repayment threshold. As such, the people who’ll be dancing around the repayment threshold, repaying for a few months but entitled to a refund at the end of the year, will be on a lower income and, therefore, less able to afford unnecessary student loan repayments.”

An SLC spokesperson said deductions are taken by employers weekly or monthly when repayer earnings are higher than the threshold for the pay period. If repayments are taken too soon, graduates should contact their employer.

“The overwhelming majority of repayments are taken correctly and SLC routinely refunds customers who have over repaid. In the last year, SLC automatically refunded 77,973 customers and will continue to do so on a monthly basis.

“Any customer who has had a deduction in a previous tax year and whose earnings were below their annual repayment threshold should check their online account, and if they are eligible for a refund, contact SLC.”