The Chancellor announced at the 2025 Budget that the student loan repayment threshold would be frozen for three years from April 2027, according to the Treasury Committee1. Borrowers on Plan 2 make loan repayments of 9% of their earnings above £28,4701. The Treasury Committee is launching a new inquiry into student loans and the broader taxation of graduates, it said on 12 March 20261.
The Committee said it is aware that many graduates have become intensely dissatisfied with the terms of the loan, and that this was amplified by the recent decision to freeze the threshold for repayments1. It is seeking evidence on graduates' repayment terms, including the extent to which they are reasonable and proportionate in the broader context of graduates' marginal tax rates1. The inquiry will not look at the funding of universities or the administration of individual student loans1. Anyone over the age of 16 can contribute their experiences through an online survey, with questions including whether they would take out the loan today if given the option and whether repayments are having a material impact on their financial planning1.
"This inquiry is about fairness. Fundamentally, what we're asking is, have the goalposts been moved in a way which is unfair to graduates?"
According to the Institute for Fiscal Studies, students now leave university with more than £50,000 in student loan debt1. The Office for Budget Responsibility has forecast that by 2030, someone working full-time on the minimum wage will earn around £28,995, which is only £400 lower than the student debt repayment threshold2. The National Union of Students has warned that the freeze could put pressure on new graduates who are struggling to afford food and bills, as the salary at which graduates repay their loans approaches the minimum wage, The Guardian has reported2.
Thresholds differ by plan. Under changes announced in the Autumn Budget, the student loan repayment threshold will rise to £29,835 in April 2026 for those on Plan 2 and then be frozen until April 20302. From April 2030, the threshold will rise each year in line with inflation, though it has not been specified whether RPI or the Consumer Price Index will be used2. No changes were announced to Plans 1, 4 and 52. Welsh students who started their course since 2012 are also on Plan 2, but it has not been confirmed whether the change will apply in Wales2.
| Plan | Who this applies to | 2025-26 threshold | 2026-27 threshold |
|---|---|---|---|
| Plan 1 | English and Welsh students who started an undergraduate course anywhere in the UK before 1 September 2012 | £26,065 | £26,900 |
| Plan 2 | English and Welsh students who started an undergraduate course anywhere in the UK between September 2012 and July 2023 | £28,470 | £29,385 |
| Plan 4 | Scottish students who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998 | £32,745 | Expected to rise to £33,795 |
| Plan 5 | English students who started an undergraduate course from August 2023 | n/a | £25,000 |
| Postgraduate loan | Students who took out a Master's or Doctoral loan | £21,000 | £21,000 |
Source: Which?2
Repayments are 9% of income above the threshold on Plans 1, 2, 4 and 5, and 6% of income above the threshold for postgraduate loans2. Borrowers become liable for repayments from the April after their course ends, although nothing is paid until earnings rise above the plan's threshold2. Recent figures from the Student Loans Company show that £142m was refunded to more than half a million customers in 2024-25, and so far in 2025-26 the SLC has contacted 642,000 customers who are eligible for a refund2. The SLC introduced a digital tool in 2024 to make it easier to claim below-threshold refunds2. Refunds can only be claimed for tax years that have ended, as they are based on total annual income, and the refunded amount is added back to the outstanding balance on the loan2.
Why it matters for households
The freeze applies to Plan 2 borrowers, which covers English and Welsh students who started an undergraduate course anywhere in the UK between September 2012 and July 20232. Because the threshold stays at £28,470 rather than rising with inflation, more graduates will meet the repayment point as wages grow, and a larger share of income will be subject to repayment than if the threshold had been uprated2. The change takes effect from April 2027 and runs for three years1. The Committee's inquiry covers repayment terms and the marginal tax rates graduates face, but not university funding or the administration of individual loans1. Separately, the SLC has contacted 642,000 customers in 2025-26 who may be eligible for a below-threshold refund2.
What happens next
The Treasury Committee is accepting written evidence and survey responses from anyone over 16 as part of its inquiry into student loans and the taxation of graduates1. The Plan 2 threshold rises to £29,835 in April 2026 before the freeze begins in April 20272. From April 2030 the threshold is due to rise annually in line with inflation, with the index not yet specified2.
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