Martin Lewis warns 100,000 graduates have overpaid on student loans – how to reclaim
MARTIN Lewis has warned how 100,000 graduates have overpaid on their student loans in the last year alone - but you can claim the money back.
Those affected could claim back hundreds, or even thousands of pounds, after being placed on the wrong loan plan.
A Freedom of Information request by found employers were automatically placing workers on “Plan 1” student loan repayment plans.
With “Plan 1” loans, you need to make repayments once you reach a lower level of earnings compared with those on “Plan 2”.
MoneySavingExpert found 102,658 graduates had overpaid between April 2019 and April 2020.
This is also likely to have been the case since 2016 when “Plan 2” loans were introduced, according to MSE.
What is Plan 1 and Plan 2?
You should be on “Plan 1” if you’re an English or Welsh student who started an undergraduate course before September 1, 2012.
Scottish and Northern Irish students are also automatically on “Plan 1”.
For “Plan 2”, you're an English or Welsh student who started an undergraduate course after September 1, 2012.
The crucial difference is “Plan 1” students start repaying 9% of their income when they earn over £19,390, while it’s .
So if someone is wrongly placed on “Plan 1” as opposed to “Plan 2”, they’ll have started to repay their student loan before they should have.
How to check if you’ve overpaid
First, you’ll need to work out what plan you should be on - you can use the breakdown above to help you.
Alternatively, you can log into your Student Loans Company (SLC) account to see your most up-to-date information.
Once you’ve checked what plan you should be paying, simply ask your current employer what plan it has you on.
You can also get in contact with previous employers to see what plan they had you on.
Alternatively, contact HMRC and they should be able to help you identify what plan you’ve been paying.
How to reclaim if you’ve overpaid
If you’re on the wrong plan, you’ll first want to tell your current employer so they can correct the mistake.
For your actual refund, you’ll need to contact SLC directly on 0300 100 0611 (or +44 141 243 3660 from overseas).
However, MoneySavingExpert warns that some 30,224 borrowers may have actually underpaid on their student loans by being incorrectly placed on “Plan 2” instead of “Plan 1”.
But MSE says you won’t be asked to repay anything - although you’ll have “Plan 1” deductions taken from your pay packed in the future.
MoneySavingExpert.com founder Martin Lewis says: "The student loan interest rate is as high as 5.6% on Plan 2 loans – so it's understandable that many would think overpaying a good thing as it reduces the interest.
"However, Plan 2 student loan repayments act far more like a tax than a debt – and just like a tax, if you've overpaid, it's worth getting the cash back.”
HMRC told MSE it tries to make sure as many people are on the right loan plan as possible.
An HMRC spokesperson said: "The vast majority of employers get things right first time and put employees with student loans on the right plan type.
" For the minority who initially get it wrong, HMRC will let employers know this and inform them which loan plan an employee should be on.
"To ensure they get things right first time, it is important that employers ask employees about their student loan position, using the HMRC , ahead of the first payroll run.”
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