Over 100,000 People Owed Cash Back Due To Student Loan Error, Says Martin Lewis
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Martin Lewis has revealed that over 100,000 people have overpaid on their student loans, meaning they can claim the cash back if they want to.
The issue has arisen due to the fact there are two separate plans in place under which people repay their student loans.
Basically, anyone who started university before 2012 will be on the older 'Plan 1', while those who started after will have been put on 'Plan 2’.
However, many companies have mistakenly put their employees on Plan 1 instead of Plan 2, meaning they are paying back a bigger portion of their income each month.
You may think that this will benefit you in the long run by clearing your loan faster, but it’s un likely it will as the repayment amounts don't change depending on how much you owe, and on Plan 2 the balance is wiped after 30 years anyway.
Speaking to the Mirror, Martin Lewis said: "The only people who may want to overpay are very higher earners (the top 17% of graduates) who will be likely to clear the loan within the 30 years.
"If in doubt though, and you need the cash (to pay off other debt or a mortgage, for example), reclaim your overpayments. It's understandable that many would think overpaying is a good thing as it reduces the interest.
"[But for most people] overpaying will simply mean paying more unnecessarily, as the amount you pay will just be fixed over 30 years as a set proportion of income.
"Therefore, taking the overpayment back won't result in you paying any more in future, so it is a pure gain - do it. 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.
"The stats show the huge majority (83%) of those in England on Plan 2 loans are unlikely to clear their loan in full in the 30 years before it's wiped (a higher proportion of those in Wales, where the loan is lower, will)."
Data obtained by Lewis' company MoneySavingExpert, through a Freedom of Information request, shows that between April 2019 and April 2020, 102,658 graduates and other borrowers had Plan 1 deductions taken when they should have been on a Plan 2 loan.
If you think you may have been overpaying, you can check by asking your employer which plan you're on.
When it comes to reclaiming, you can download a copy of your plan type on the Student Loan Company website and can hand this to your employer.
Alternatively, you can ring the Student Loans Company on 0300 100 0611 (or +44 141 243 3660 from overseas), explain your situation and ask to reclaim the money you're owed.
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