Student Loan Plan 2 Repayment Threshold Frozen Until 2030
The government confirmed a three-year freeze on the £29,385 repayment threshold for Plan 2 student loans, affecting graduates from 2012 onwards and increasing their effective marginal tax rates.
At her 2025 Budget, the Chancellor announced the £28,470 threshold for Plan 2 student loans would be frozen for three years from April 2027. This decision affects English graduates who started university in 2012 or later (but before July 2023), who currently repay at a rate of 9% of any income over £29,385, with this threshold frozen for tax years commencing April 2027, 2028, and 2029.
Impact on Graduates
The Committee is aware that many graduates have become intensely dissatisfied with the terms of the loan, which was amplified by the recent decision to freeze the threshold for repayments. As wages rise with inflation but the repayment threshold remains static, more graduates will see deductions from their pay, and those already repaying will see larger amounts taken each month.
For 2026/27, Plan 1 is £26,900, Plan 2 is £29,385, Plan 4 (Scotland) is £33,795, Plan 5 is £25,000, and Postgraduate Loan is £21,000. Student loan repayments function more like a graduate tax than a traditional loan — they are calculated as a percentage of income above a threshold, never on the loan balance. Plans 1, 2, 4 and 5 take 9% of income above their threshold; the Postgraduate Loan takes 6%. Earn below the threshold and you repay nothing, whatever you owe.
For international students and foreign workers: If you studied in England on a UK student loan and now work in the UK (or earn UK income while abroad), you're subject to these thresholds. The freeze means fiscal drag — as your salary increases, more of your income becomes subject to the 9% deduction. If you are outside the UK for more than three months, you may have to make repayments directly to the Student Loans Company, and overseas income thresholds can differ. If you're moving abroad permanently, contact the Student Loans Company before you leave to understand your obligations — failure to notify them can result in penalties.
