Money saving expert Martin Lewis has informed people who started work between 2012 and 2022 that they ‘should get their money back’ if they check and find out they’ve overpaid their student loan and are due a refund.
Martin explained to the studio audience during his latest episode of The Martin Lewis Money Show Live on ITV1 on Tuesday, November 11, how those who left university and started work between 2012 and 2022 could be owed money by the Student Loans Company due to a quirk in how the rules work.
He explained: “Now, the rules state, absolutely plainly, you only need to repay the student loan if you earned over the annual threshold in a tax year.
“What your annual threshold is depends which plan you’re on.”
Martin said he would focus on Plan 2 loans, which is the type most people are on, in England, which is those who went to university between 2012 and 2022, and in Wales from 2012 onwards.
For those people, your repayment threshold is £28,470 a year, and you repay 9% of everything above that.
Martin added: “That’s how it works, but PAYE payroll, it takes the money based on your monthly earnings.
“So £28,470 a year is equivalent to £2,372 a month. You repay 9% of everything you earn above that a month.”
Martin then set out a scenario if you left university and started a job paying £36,000 a year in July, a few months after leaving university, or £3,000 a month pre-tax. In each of the months that follow, you have to repay 9% of everything above the threshold, about £56 a month, each month, for the remaining nine months of the tax year, until the end of March.
But your total tax year earnings (April to March) would only be £27,000, and the annual threshold is over £28,470.
Martin added: “You earned less than the threshold, you don’t have to repay your student loan.
“Here are the payments that you made, £508, you can reclaim the £508.
“This is big, for many people.”
Martin added that this most commonly affects those who only work for part of the year (as above), those on commission, or those on variable incomes who still end up under the threshold.
Student Loan Company says that the easiest and quickest way for customers to request a below threshold refund is via SLC’s Digital Refund Service, in their online account.
The refund is then paid directly into their bank account. SLC must wait until it receives customer annual earnings information from HMRC following the end of a tax year. When this is received, SLC will communicate with customers if they are eligible for a below threshold refund – more info is available at: Student loan refunds – Getting a refund
Of course, one thing to bear in mind is that if you receive a student loan refund, you will owe that money again to the Student Loan Company. Unless you are earning enough to pay off the debt, it will be wiped automatically after 30 years, so it is unlikely to be worth telling SLC to keep your money if you’re not currently meeting the minimum threshold, as the debt will be wiped after 30 years regardless of how much you owe.