As you might have heard on the news or read in this article, £15 million has been overpaid this year by former students repaying their student loan – because the repayments have continued to be taken even after the full amount of the loan has been paid back.

The problem occurs because although the Student Loans Company (SLC) has informed your employer through HMRC that you should have student loan deducted from your payslip each month, the SLC doesn’t know how much is being repaid until the end of the tax year when your employer files its tax return. As you’ll see on the About page of The Salary Calculator, student loans are repaid at a fixed rate of 9% of anything you earn over £15,000 – no matter how large (or small) the balance of the loan. If you are close to repaying the total of your loan, deductions may continue for some time until the SLC realise that you have overpaid – and even then, they have to communicate to HMRC who then pass the “stop” message on to your employer.

There are things you can do to help prevent overpayment, however. The Student Loan Repayment Portal (which appears currently to be unavailable) will show the last known balance of your account, and allows you to enter information from your payslips to estimate how much is outstanding. If you are close to repaying the full amount, you can contact the SLC directly and pay off the remaining balance by debit card over the phone. When you do this you will need to make sure that the stop notice makes its way from the SLC through HMRC to your employer – if not, you will find the deductions continue to be taken even though you have repaid the loan. You may be able to get the SLC to fax confirmation of the stop directly to your employer, making sure it arrives in time for your next payslip – if you speak to the SLC about repaying your loan, you can ask them about this and discuss it with your employer.

Alternatively, you can arrange for your remaining balance to be taken by Direct Debit rather than by PAYE deduction – meaning that when the balance has been repaid in full, the debits stop automatically. Again, the SLC need to send a “stop” note to HMRC and your employer, but this happens before the amount is repaid and therefore if something goes wrong you are less likely to be trying to get a refund.

If you are repaying your student loan and you think this may apply to you, check out the Repayment Portal I linked to above and see how much is still outstanding on your loan. I repaid my loan earlier this year and I can tell you it is a good feeling!

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Student Loan

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3 Comments to Student Loan over-repayment

  1. […] your student loan and you think you might be close to paying it off, this earlier blog post about Student Loan over-repayment may be of interest to […]

  2. Student Loan repayment threshold | The Salary Calculator on April 23rd, 2012
  3. This may be a silly question, but here goes anyway!

    If the amount you pay is taken as part of your PAYE deductions, my understanding is it is therefore gross of tax. So if I switch to Direct Debit or pay by debit card, doesn’t that mean I am going to lose out because my repayments will then be after tax rather than before? Is this likely to be a significant loss?

    I may well be incorrect… neither maths nor the tax system are my strong points :)

  4. Guy Rintoul on September 17th, 2013
  5. Hi Guy,

    There would be no difference* if you were to pay outside of PAYE. Your student loan contributions are worked out on your gross salary (i.e. before tax and NI are deducted), no matter how you pay the contributions. And, to (I think) address the point you’re getting at, the student loan contributions don’t reduce your salary for the purposes of tax and NI. You pay the same tax and NI whether or not you make student loan contributions (you can test this on the Salary Calculator by toggling the student loan tick box). In this respect student loan is different from most pensions, which are deducted from your gross salary before tax and therefore reduce the amount of tax you have to pay. More information is available on the Student Loan Repayment website.

    * I’ve simplified a little. Loan repayments are rounded down to the nearest pound per pay period, so potentially if you went from making a contribution every month in your payslip to once a year through self-assessment, you might end up paying as much as £12 more each year. But of course, everything you pay goes towards reducing your outstanding loan amount, so paying a little more each year will reduce the amount you owe and ultimately help you pay it off sooner.

  6. admin on September 17th, 2013

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