Graduates over paid student loans by almost £200m last year

Hundreds of thousands of graduates collectively paid £189 million more than they should have done in student loan repayments last tax year, according to new figures from the Student Loans Company.

More than half a million people – 514,000 – across the UK made over payments in 2025-26, with the average refund owed totalling £240.

Student loan overpayments can occur when a graduate makes an automatic monthly repayment, but then eventually goes on to earn less than the repayment threshold across the course of the year. This was the most common cause behind the repayments, accounting for more than £155 million of the repayments in 2025-26. 

It can also be caused by graduates mistakenly being put on the wrong repayment plan, making a repayment before the repayment period begins, or continuing to repay after their balance has been cleared.

The student loan system sees students in England pay back 9 per cent of their monthly salaries above the repayment threshold. For graduates who began university between 2012-22, the repayment threshold currently stands at £29,385 and is wiped after 30 years.  For those on Plan 5 loans – affecting anyone who began university after 2023 – the threshold is £25,000 a year and is wiped after 40 years.

Those on Plan 2 loans accounted for the majority of overpayments triggered by earning an annual salary below the threshold, totalling 650,602 graduates, and over payments of £92,404,764. 

A total of £6,683,877 was taken before borrowers' repayment periods had started – usually the first April after a student graduates – including £4,422,886 by 25,045 Plan 2 borrowers.

Graduates made payments of £4,618,803 to the wrong Student Loan plan, with the vast majority made by 12,994 people who should have been paying into Plan 2 loans, totalling £4,169,833. The number of graduates who repayments taken despite already having cleared their balance in full was 56,376, who paid a total of £23,237,898.

So far in the 2026-27 tax year, 277,500 students have over paid £65.3 million, the figures show.

The student loan system has come under criticism in recent years, after former Labour chancellor Rachel Reeves froze the Plan 2 repayment threshold at its current rate for three years, despite previous promises from the government that it would rise with inflation. 

Tom Allingham, a student money expert at Save the Student noted there had been a “distinct lack of Student Loan repayment reform” in the Autumn Budget announced on 28 October, but said hundreds of thousands of borrowers “will be relieved to discover they can ease the burden of their loan by claiming a refund”.

He explained that the overpayments often occur as “repayments are taken when you’re paid, not at the end of the tax year, so the weekly, fortnightly or monthly thresholds are just as important”.

“If you work extra shifts, receive a bonus or change jobs part-way through the year, you may earn more than the weekly or monthly threshold. But if your total earnings in that financial year are eventually less than the annual threshold, you’re eligible for a refund,” he said.

“Whether graduates should claim the refund depends on each individual’s circumstances and preferences. As has been noted this year, many Plan 2 borrowers never clear their debts before they’re wiped, so voluntarily overpaying is simply pouring money down the drain. In this case, it makes financial sense to claim the refund.

“If you think you’re on track to clear your debt before it’s wiped – particularly if you’re not on Plan 2 – then you may be happy to overpay now and clear the debt slightly earlier. Alternatively, you might want to claim the refund anyway, preferring to have the extra cash during a cost-of-living crisis.”

juliette.rowsell@timeshighereducation.com