My employer overdeducted student loan repayments, what can I do?

Seeing more student loan repayment deducted from your pay than expected can be frustrating especially when you already feel stretched financially. In my experience this is one of the most common payroll issues employees face and it happens far more often than people realise. The good news is that student loan overpayments can be corrected and you will not lose out financially. The key is knowing why it happened and whether the refund should come from your employer or the Student Loans Company.

In my opinion the most important thing to remember is that student loan repayments are controlled by HMRC and payroll systems rather than the Student Loans Company itself. This means most overdeductions are administrative errors that can be fixed once the cause is identified. This guide explains why overpayments happen, how to check your situation, who owes you the refund, and what you should do next.

Why student loan overdeductions happen

The student loan system is tied to your income not the amount you owe. You pay 9 percent or 6 percent of earnings over your threshold depending on the plan type. Problems usually arise from incorrect payroll information rather than mistakes by the Student Loans Company.

In my opinion most overdeductions fall into one of a few categories.

1. Wrong student loan plan type

This is the most common cause of overpayments. Your plan type depends on when and where you studied. If payroll assigns the wrong plan type they will deduct repayments at the wrong threshold.

Example

You are on Plan 2 but payroll sets you up on Plan 1.
Plan 1 has a much lower threshold so deductions start earlier which leads to overpayment.

Why this happens

• You did not complete the starter checklist

• Payroll guessed your plan type

• Your student loan status was not updated

• HMRC sent outdated information

In my opinion this is the first thing to check whenever you see incorrect deductions.

2. Your employer started deductions too early

Deductions should only begin after HMRC confirms that you have a student loan. Employers should not deduct automatically unless the starter checklist indicates a loan or HMRC issues a student loan notice.

But sometimes employers:

• Tick the wrong box on the starter form

• Enter incomplete information

• Assume every employee has a loan

This causes unnecessary deductions even when you are under the threshold.

3. You earn under the threshold but payroll still deducted money

If your earnings fall below your repayment threshold you should not pay anything for that period. Overdeductions often happen when:

• Overtime stopped

• Hours dropped

• You moved to part time work

• You were off sick

• You went on maternity or paternity leave

Payroll systems sometimes take time to adjust which leads to incorrect deductions.

4. Your employer used an emergency tax code and payroll misread the information

Emergency tax codes can sometimes trigger unnecessary student loan deductions because payroll thinks you are a new starter with incomplete information.

This is common when:

• Moving jobs

• Not submitting a P45

• HMRC is still updating your records

5. You worked more than one job

If you have multiple part time jobs each employer treats your earnings separately. This means each employer might deduct student loan repayments even though your combined income is below the threshold.

You can reclaim overpayments later.

6. Payroll processed a bonus incorrectly

Bonuses count as income for that period and can trigger repayments even if you are normally below the threshold. If your bonus was processed incorrectly you may have an overpayment.

How to check if you were overcharged

You should go through the following steps carefully.

Step 1: Check your student loan plan type

Your payslip will usually show:

• Student Loan Plan 1

• Student Loan Plan 2

• Student Loan Plan 4 (Scotland)

• Student Loan Plan 5

• Postgraduate Loan

Compare this with your actual plan type.

You can check this in your Student Loans Company account.

What to look for

If the plan type on your payslip is different from your actual plan you have been overcharged.

In my opinion this is the easiest issue to identify.

Step 2: Check whether your income was above the repayment threshold

You only pay student loan if your earnings exceed your monthly or weekly threshold.

Example (Plan 2)

• Annual threshold: £27,295

• Monthly equivalent: £2,274

• Weekly equivalent: £524

If your earnings were below these amounts for any period and payroll still deducted repayments you have been overcharged.

Step 3: Check your starter checklist or P45

These documents tell payroll whether you have a student loan. If the information was entered incorrectly deductions may have started unnecessarily.

Step 4: Check your HMRC Personal Tax Account

Your online tax account will show:

• Your plan type

• Earnings reported

• Student loan deductions reported

• Tax code information

If HMRC has incorrect information they may have instructed your employer incorrectly.

Who should refund you?

Whether the refund comes from your employer or the Student Loans Company depends entirely on when the error happened.

In my opinion this is the part people find most confusing so I will break it down clearly.

If the overpayment happened THIS tax year

Your employer must refund you

The employer is responsible for correcting overdeductions made in the current tax year. This is because PAYE adjustments can be corrected through payroll before 5 April.

What to do

• Speak to payroll

• Provide payslips and evidence

• Ask for the deduction to be reversed in payroll

• Payroll will refund you through your next payslip

Why employer refunds work

Payroll can correct year to date figures in the system which ensures HMRC receives the right numbers.

In my opinion this is the fastest way to get your money back.

If the overpayment happened in a PREVIOUS tax year

The Student Loans Company refunds you

After the tax year closes your employer cannot correct payroll records. Instead you must request a refund directly from the SLC.

How to claim

• Log in to your SLC account

• Check your balance

• Fill in the refund request

• Provide payslip evidence if asked

Refunds typically take a few weeks.

Important

SLC will only refund overpayments once HMRC confirms the final amounts for the tax year.

Special cases

1. You have finished repaying the loan but deductions continued

If you have already fully repaid the loan and payroll kept deducting repayments, you are entitled to a full refund of the extra amounts taken.

If the error is this tax year

Your employer refunds you.

If it happened in previous years

The Student Loans Company refunds you after verifying your account.

In my opinion this situation is extremely common because payroll teams do not always stop deductions when you approach the loan end.

2. You repaid too much because you had multiple employers

Each employer deducts repayments based on income from that job alone. If your combined income is below the threshold but each job deducted repayments you can reclaim the extra in full.

SLC handles this at the end of the year.

3. You moved abroad temporarily

If you did not update the SLC about your income abroad they may charge a fixed repayment which can be too high. You can claim this back but SLC may reassess your overseas income first.

4. You were on maternity or sick leave

Reduced income during leave should reduce or stop repayments. If payroll did not adjust correctly you can request a refund through your employer.

5. You switched to self employment part way through the year

Your employer might have deducted repayments on PAYE then you were charged again through Self Assessment. HMRC will reconcile this automatically and refund any overpayments after the tax return is processed.

How to speak to your employer about overdeductions

Many people feel awkward raising payroll issues but in my opinion you should never hesitate. Employers are used to handling PAYE corrections.

When contacting payroll:

• Be clear and factual

• Provide your payslip

• Provide your plan type

• Explain why the deduction is incorrect

• Ask for a payroll correction and refund

Payroll teams can check your HMRC notices and adjust your records.

How long does it take to receive a refund?

From your employer

Refunds usually appear in the next payroll run. Some employers can process an off-cycle payment but this depends on their policies.

From the Student Loans Company

Refunds usually take two to eight weeks depending on the volume of cases.

From HMRC (if involved)

If HMRC needs to reconcile your income the timeline may be longer but SLC usually experiences the delay, not you.

Can overdeductions affect your tax code or other payroll items?

No. Student loan deductions do not affect:

• Your tax code

• Your personal allowance

• Your National Insurance

• Your pension deductions

However payroll errors that impact student loan may also impact other areas so it is worth checking your entire payslip.

How to prevent student loan overpayments in the future

In my opinion most of these issues can be avoided with simple checks.

1. Complete the starter checklist every time you start a new job

Never assume your employer already knows your plan type.

2. Keep a photo or PDF of your student loan plan type

This helps when onboarding.

3. Check your HMRC Personal Tax Account twice a year

This ensures the plan type stored by HMRC is correct.

4. Review your payslip monthly

Check that deductions only appear when your income is above the threshold.

5. Apply for direct debit when you are close to paying off the loan

This prevents overpayment at the end.

In my opinion most people find peace of mind simply by reviewing their payslip regularly.

Real world examples

Example 1: Wrong plan type

Anna was on Plan 2 but payroll set her up on Plan 1. She was overcharged for four months. Because the deductions were in the same tax year her employer refunded the full amount.

Example 2: Under the threshold

James earned £1,800 a month but payroll deducted Plan 2 repayments even though the threshold was over £2,200. Payroll corrected it and refunded him the next month.

Example 3: New starter without a P45

Fiona didn’t submit a P45 and payroll assumed she had a student loan. She didn’t. Payroll refunded her and corrected her starter declaration.

Example 4: Overpayment after loan fully repaid

Liam repaid his loan in June but payroll did not stop deductions until December. The Student Loans Company refunded the extra amounts.

In my opinion: the key things you should know

If I were giving you the essential points quickly they would be:

1. Overdeductions are common and fixable.

2. Your employer must refund anything deducted incorrectly in the current tax year.

3. The Student Loans Company refunds overpayments from previous years.

4. Wrong plan type is the most common cause.

5. A bonus or temporary earnings spike can trigger unnecessary deductions.

6. You should always check your payslip and Personal Tax Account.

7. You will never lose money long term from overdeduction.

In my opinion the biggest mistake people make is waiting too long to query their payslip.

Final thoughts

If your employer has overdeducted student loan repayments do not panic. It is a common issue and there are clear rules about refunds. Employers can correct mistakes in the current tax year and the Student Loans Company will refund anything relating to previous years. The most important thing you can do is identify the cause of the error then follow the correct process to fix it.

In my opinion reviewing your payslips regularly and keeping your HMRC student loan information up to date is the best long term protection against future overpayments.