Graduates over-repaid £300 million in loan debt in past decade

Hundreds of graduates are owed more than £5,000 after over-repaying on their student loan debt, according to new figures that show more than £300 million has been collected in error in the past decade.

Data from the Student Loans Company (SLC) released on 19 March shows that 58,532 people repaid more than required on their loans in 2024-25. Of them, about 80 per cent over-repaid less than £500, but 271 graduates were owed more than £5,000 each.

Issues can be caused when loan repayments continue to be taken despite an individual clearing all of their debt, often without their knowledge. 

The SLC has introduced several new measures in recent years as part of attempts to reduce over-repayments but the latest figures indicate these are struggling to have an effect. 

It comes as MPs are set to investigate repayment terms amid widespread complaints that the current system is unfair. 

Alex Stanley, NUS UK vice-president higher education, told Times Higher Education that the figures are yet more evidence that the student loan system is “freezing our future and is in dire need of an overhaul”.

“Tens of thousands of graduates – already living pay cheque to pay cheque – have overpaid on their loans and have been waiting years, and in some cases a decade, for a refund. That’s money that could have gone towards rent, bills, a mortgage, but instead has been gathering interest in the Treasury’s accounts.”

Of the people who paid too much last year, 22,540 (39 per cent) have already been refunded – averaging around £990 each.

But almost 36,000 are still waiting for a refund of about £50 each. This is treble the number still waiting for a refund from payments in 2023-24.

The SLC said the number of people owed money from 2024-25 will considerably reduce over the coming year, likely to a similar level as the year before. 

Stanley urged the SLC to get on top of overpayments and refunds as part of wider reforms to the repayment system. 

“For graduates we need to see three things – the repayment thresholds to increase annually in line with inflation, interest rates to be at inflation only, and for interest to be capped,” he added.

Students over-repaid £23.9 million last year – up from £23.5 million in 2023-24 and the highest level since 2018-19.

The SLC has increased the automatic refund amount from £500 to £3,000, introduced a new online repayment service, and encouraged graduates who are nearing clearing their debt to pay the final amounts via direct debit, rather than through their salary.

Tom Allingham, student loans expert at Save the Student, said the data is another reminder that all graduates need to keep an eye on their repayments.

“It is concerning that so many borrowers are owed refunds of thousands of pounds, or from a decade ago. Despite the SLC’s efforts to minimise overpayments, it’s clear that more needs to be done to ensure that these huge sums of money are returned.”

Since the SLC figures began in 2015-16, a total of 626,680 graduates overpaid £305.5 million on their debt.

Including the 36,000 from 2024-25, almost 80,000 customers are still owed £15 million in refunds.

The data includes UK domiciled students who took out Plan 1, Plan 2, Plan 3 (postgraduate loans) or Plan 4 (Scotland loans post-April 2021) repayment plans.

There are also a number of students from the European Union who took out loans before Brexit. About 1,200 EU students over-repaid a total of £558,000 last year.

An SLC spokesperson said over repaying was "entirely avoidable" if graduates switch to direct debit as it stops employers deducting from their earnings.

“We also proactively contact all customers who reach the end of their loan and are due a refund," they added. "Where we hold up-to-date customer details, we automatically refund customers directly into their bank accounts which is why it’s so important that customers keep their contact information updated.”

patrick.jack@timeshighereducation.com