In the financial year which ran between 2019 and 2020, 54,516 graduates overpaid their student loans, because their payments didn’t stop once the debt was settled.
That's according to data from the Student Loans Company. Analysis by Hargreaves Lansdown found that the average overpayment was £424 ($602). In total £23.1m was overpaid.
Despite this alarming figure, the average overpayment has dropped 30% in the past four years, and the number of people affected is down 38%, after the Student Loans Company changed the system.
Massive overpayments in previous years owed much to the fact that repayments are made through PAYE and until April 2019, HMRC only sent the Student Loans Company details of repayments once a year, so in the gap between repaying in full and sending the data, millions of people overpaid.
From April 2019 it started sending student loan information reported by employees once a week, and for people who are paid monthly by PAYE it sends it monthly.
Still, the volume of people overpaying is a cause for concern.
"Part of the problem is that people took these loans out so long ago that their contact details may well have changed, so the protections the Student Loan Company introduced to avoid overpayments won’t help them at all," said Sarah Coles, personal finance analyst, Hargreaves Lansdown.
"All the tips on avoiding overpayments will end up sitting on the mat of a house they used to live in, or clogging up the inbox of an email account they no longer use.
"The same goes for their bank account. Any overpayments between £25 and £750 should be automatically refunded, but if the Student Loans Company has an old bank account on file, they can’t do this."
The five mistakes that mean you’ll overpay
Ignoring messages from the Student Loans Company about the direct debit scheme. Joining this is the easiest way to avoid overpaying.
Not keeping your contact details up to date with the Student Loans Company – including your postal address, email and mobile numbers. This means you’ll miss all the messages about how to avoid overpaying.
Ignoring messages asking you to repay the total balance. This can feel like a cheeky request out of the blue, when you’ve been repaying diligently for years, but it’s designed to avoid overpayments, so if you can afford to do it, it’ll save the hassle of overpaying.
Not signing up to the Online Repayment Service, which is the best way to check if you’ve overpaid and if you need to request a refund.
Not updating the bank details held by the Student Loans Company, so the overpayments can’t be automatically refunded.
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