In a significant boost for recent graduates and long-term borrowers, the UK's Student Loans Company (SLC) has processed refunds totalling £175.2 million for over 721,100 individuals in the 2024/25 tax year. This marks a sharp rise from the previous year's £61.1 million disbursed to 216,300 customers, highlighting persistent challenges in the Income Contingent Repayment (ICR) system. As living costs squeeze earnings, these refunds underscore how even compliant repayments can lead to unintended overpayments, offering relief but also exposing gaps in the student finance framework.
The bulk of refunds—£142 million—stemmed from "below threshold repayments," where borrowers deducted via Pay-As-You-Earn (PAYE) exceeded their annual earnings limits. A staggering 575,100 people qualified, reclaiming an average of around £247 each. This scenario arises because repayments are triggered by periodic pay exceeding plan-specific thresholds (e.g., £524.90 weekly for Plan 2), but annual income falls short, prompting post-year refunds using HMRC data. Plan 2 borrowers, covering post-2012 England and Wales loans, dominated with 643,824 affected and £86 million repaid in-year, followed by Plan 1 (pre-2012, £46.3 million from 283,211 cases).
Other categories revealed systemic friction points. Over-repayments after full loan clearance hit £23.5 million for 57,764 borrowers, often due to delayed HMRC stop notices. Early deductions before the Statutory Repayment Due Date (SRDD)—typically the April after course completion—affected 36,844 people, totaling £1.2 million, largely under Plan 2 (£0.85 million). Employer errors, like misallocating to Plan 1 instead of Plan 2 or 4, led to £5.8 million in refunds for 17,833 cases. Overall, the average refund dipped to £240 from £280 in 2023/24, suggesting more claimants but smaller sums, possibly aided by SLC's new digital service launched in May 2024. Of 642,200 contacted, 80% engaged, with 31% claiming online.
Thresholds vary by plan: Plan 1 demands £24,990 annually, Plan 2 £27,295, postgraduate Plan 3 £21,000, Scottish Plan 4 £31,395, and nascent Plan 5 £25,000. Multi-plan holders qualify only against the lowest threshold. Data excludes self-assessment repayments (7% of total) and focuses on UK/EU domiciles across England, Wales, Northern Ireland, and Scotland.
This surge reflects broader trends: refunds tripled year-on-year, with 2025/26 already at £84 million for 358,500 early claimants. Improved communications—like pre-SRDD emails and the Online Repayment Service—curb errors, yet employer payroll glitches persist. SLC urges direct debit enrollment to avoid overpayments and timely contact updates, as refunds (except post-full repayment) reinstate balances plus interest, potentially extending terms.
For borrowers, these figures are a reminder to monitor earnings via SLC portals. While refunds provide vital cash—averaging £230-£280 historically—they spotlight ICR's periodic pitfalls in volatile job markets. As tuition fees climb and wages stagnate, policymakers may eye reforms for fairer, real-time adjustments. Until then, proactive claiming remains key to unlocking this financial windfall.
