Tens of thousands of university leavers risk wasting vast amounts of money by voluntarily paying off their student loan even though the amount they earn means they don't need to.
Student loans only have to be repaid when you earn over a certain amount known as the 'repayment threshold'.
But figures obtained under the Freedom of Information Act show that in the 2016/17 financial year alone, more than 30,000 people chose to make student loan repayments when they were earning LESS than the repayment threshold.
In many cases, those who have made voluntary repayments will have paid money they would not have otherwise had to, reports the Mirror .
It means thousands of students have effectively "flushed money down the loo" thanks to "misleading" loan statements, Martin Lewis of MoneySavingExpert.com, has warned.
"More like tax than a debt"
He said that in the vast majority of cases the debt is wiped after 30 years no matter how much or little is left on your account.
"For most people student loan repayments act far more like a tax than a debt," Martin, who founded MoneySavingExpert.com, said.
"For those on lower earnings, overpaying some of your loan is often futile as it won’t alter what you repay in future – in which case overpaying is just flushing money down the loo.”
However, the way the statements sent out are written, showing the total "debt" rising and more and more interest being added to it each year, can pressure people into putting money into overpayments.
MoneySavingExpert.com spoke to one mum who thought she was doing the right thing in clearing her son's debt and now regrets it.
She said: "I thought everyone would have to pay off their loans and we didn’t want him starting out in life with this hanging over him. We had a windfall and decided to pay his loan off.
"Every time I hear now that relatively few students will ever pay their loans it makes me angry. It’s very unfair. I feel very stupid.
"Had he kept the £20,000 and put it in the bank he could have used it to help buy a home. We thought we were doing the right thing. I regret it now."
80% of students won't clear their loan
She's not alone, either, figured obtained by MSE under the Freedom of Information Act show in 2016-17 alone, more than 30,000 made student loan repayments when they were earning less than the repayment threshold.
Calculations by Mirror Money show that even in the worst case scenario, students who started uni in the past 7 years would be better putting that money aside for later use than making loan overpayments now - but terms like "loan" debt" and "interest" can put pressure on people to reduce their balance now.
"The stats show the huge majority - over 80% - of these university leavers are unlikely to clear their loan in full in the 30 years before it's wiped, so that interest rate isn’t what they’ll pay," Martin, who founded MoneySavingExpert.com, said.
There are a very few cases where it might be worth it, but even people on the old Plan 1 loans (who went to uni between 1998 and 2012) are probably better off doing something else with the cash as the loan rare is just 1.75%.
So what should you do if you have any spare cash?
"Clear other debts first, and consider putting extra cash in a savings account to prevent future borrowing. After all, you can earn more there than the interest is costing you - up to 2.6%," Martin said.
