Martin Lewis ‘throwing money away warning over loans from 2012 to 2022

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The money expert has issued a new warning over a loan that millions of people across the United Kingdom owe

Martin Lewis has explained that millions of people could be overpaying on their loans. The money expert said there was a real risk that many people could be “throwing money away” due to the way a loan around five million have is structured.

He made the warning as he spoke to a man from London who was trying to work out how to pay off his debts. Callum, a 32-year-old data consultant from London, spoke to Martin on the Martin Lewis podcast this week.

Callum explained that he had a “conundrum” over what to do with his finances. And Martin’s advice on what to do in his situation had a broader message for listeners to the BBC podcast.

It’s all to do with the so-called plan 2 student loan. According to Student Loan Company data obtained this year by the Financial Times, there are 5.4 million people with plan 2 loans - which Martin said amounted to about three-quarters of outstanding student loan debt.

These loans are controversial because they mainly charge above inflation. The Money Saving Expert website has likened them to a “stealth tax”. The undergraduate loans were taken out between September 1, 2012 and July 31, 2023 in England, and since September 1, 2012 in Wales.

Callum wanted Martin’s advice on whether he should prioritise repaying his student loan or his mortgage. Martin said there was a “really important” caveat when it came to working out whether to overpay on a plan 2 loan.

He said it “depends massively on your level or earnings because it is your level of earnings that dictates the amount you repay each year, not your borrowing.” He explained that the loans get wiped after 30 years, and most people will not end up repaying them.

In Callum’s case, he is likely to do so because he is a high earner (on £99,000). But Martin says around 70 per cent of people will not repay in full in the 30 years before the loans wipe.

He said: “In that case, there is the plausible risk that overpaying your student loan will not actually reduce what you pay in the future and therefore…

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