The Government has confirmed that the repayment threshold for Plan 2 student loans will rise to £29,385 in April 2027, then remain frozen until 2030/31. With wages expected to increase over this period, more graduates will be pulled into making repayments sooner. Anyone earning above the threshold pays 9% of their income, so even small salary increases will lead to higher monthly deductions.
This change affects millions of graduates who began their courses between 1 September 2012 and 31 July 2023. The Treasury argues the freeze is fair, noting that “graduates generally benefit from higher earnings” and should therefore repay a larger share of their loan.
A leaked draft of the Office for Budget Responsibility’s Economic Outlook, published just before the Budget, estimated the freeze would raise around £400 million a year. This is driven by a greater portion of graduate income becoming repayable and by higher interest rates. Critics warn the threshold is now edging close to full-time earnings on the national living wage, which will provide £24,784.50 a year for a 37.5-hour week after its rise to £12.71 an hour in April 2026. The national minimum wage for under-21s will also increase to £10.85.
Graduate debt continues to climb. Someone completing a three-year degree in spring 2025 now leaves university owing more than £60,800, with interest of 6.2% adding around £1,700 in just a few months.
The Budget also introduced a new international student levy. From August 2028/29, universities will pay £925 per non-UK student annually. According to the Treasury, the money raised will be “fully reinvested into higher education and skills”.
Talk to us about your finances.
