Student Loan Threshold Freeze 2026: What It Means For You

TL;DR

Student loan repayment threshold freeze 2026: The Chancellor has frozen the Plan 2 repayment threshold at £29,385 from April 2027 until 2030. This means graduates will pay more over time as wages rise but the threshold stays fixed. Martin Lewis has called it unfair and urged affected graduates to write to their MPs. Here’s what it means for you - and what you can do about it.

Why Is Everyone Talking About the Student Loan Threshold Freeze?

If you’ve been on social media or caught the news lately, you’ve probably seen Martin Lewis and Rachel Reeves going head-to-head over student loans. The student loan repayment threshold freeze 2026 has become one of the most debated topics in UK personal finance - and it affects around 5.8 million graduates.

Here’s the situation: in last November’s budget, the Chancellor quietly announced that the salary threshold for Plan 2 loan repayments would be frozen for three years. That might sound technical, but the real-world impact is significant. When the threshold doesn’t rise with wages, more of your income becomes repayable. And for millions of graduates already watching their debt grow despite making payments, this feels like adding insult to injury.

Let me break down exactly what’s happening, who it affects, and what options you have.

What Is the Student Loan Repayment Threshold?

The repayment threshold is the salary level above which you start repaying your student loan. You pay 9% of everything you earn over this threshold - collected automatically through your paycheck, just like tax.

According to GOV.UK, here’s what’s happening with Plan 2 thresholds:

• April 2025: £28,470
• April 2026: £29,385
• April 2027-2030: Frozen at £29,385

So if you earn £38,385 in 2027, you’ll repay 9% of £9,000 - that’s £810 per year, or about £67.50 monthly. Every pay rise you get during the freeze means more goes toward your loan.

The Martin Lewis vs Rachel Reeves Row Explained

Martin Lewis, founder of MoneySavingExpert, has been vocal about what he sees as an unfair change to the terms graduates signed up for.

In a BBC interview, Lewis said: “I do not think it is a moral thing for you to do to be freezing the repayment threshold in this way. You didn’t say the terms were variable. This isn’t right.”

He went further, calling it “a breach of contract - a breach of promise” and suggesting that millions of affected graduates should write to their MPs to say “this isn’t on - this isn’t what we were promised.”

Chancellor Rachel Reeves defended the decision, telling LBC that it’s “not right that people who don’t go to university are having to bear all the cost for others to do so.” She emphasised that loans are written off after 30 years and graduates don’t pay until they’re earning enough.

Both have valid points. The question is whether freezing the threshold is a reasonable way to make student finance sustainable, or whether it unfairly changes the deal graduates thought they were getting.

How Much More Will You Pay?

The Institute for Fiscal Studies has done the maths. Their analysis shows that Plan 2 graduates can expect to pay significantly more over their lifetime because of threshold freezes.

For someone who started university in 2022-23, the expected lifetime repayment has increased from around £52,600 to £55,800 - a difference of about £3,200 in today’s money. That’s not because you’re borrowing more, but because you’re repaying a bigger chunk of your salary for longer.

Source: Institute for Fiscal Studies Annual Report on Education Spending, 2025

The IFS noted something striking: “These latest freezes mean that in the long run, we now expect the taxpayer will pick up almost none of the bill for financing the higher education of this cohort.”

Plan 2 vs Plan 5: Why the Difference Matters

Here’s where it gets interesting. Students who started after August 2023 are on Plan 5, which has different terms. Understanding the difference helps explain why Plan 2 graduates feel particularly aggrieved about the student loan repayment threshold freeze 2026.

Source: GOV.UK Student Loans Interest Rates

Plan 2 borrowers face higher interest rates - up to 6.2% for those earning over £52,885. That’s why many see their debt growing even as they make repayments. One graduate recently told The Guardian her debt had ballooned from £57,000 to over £77,000 despite paying £5,000 over six years - because interest of £400+ per month far exceeds her repayments.

Pro Tip: If you’re considering university now, you’d be on Plan 5 with lower interest rates but a longer 40-year write-off period. Both have trade-offs. Speak with a UniStart advisor to understand how the numbers work for your situation.

What Can You Actually Do About It?

If you’re a Plan 2 borrower affected by this freeze, here are your realistic options:

1. Write to Your MP

Martin Lewis specifically encouraged graduates to contact their MPs. Will it change anything? Possibly - if enough people make noise. Politicians respond to constituent pressure, especially on issues affecting millions of voters.

Keep your letter factual: explain you took out a loan under certain terms, those terms have been changed, and you feel this is unfair.

2. Check if You’re Due a Refund

Many graduates overpay without realising. If your income fluctuates (overtime, bonuses, irregular hours), you might pay in months when your annual income doesn’t actually exceed the threshold.

According to GOV.UK, 643,000 Plan 2 borrowers were entitled to refunds in 2024-25. Check your Student Loans Company account to see if you’re owed money back.

3. Don’t Overpay (Probably)

It feels counterintuitive, but most financial experts advise against making extra student loan repayments - unless you’re a very high earner.

Here’s why: if you won’t clear the loan before it’s written off at 30 years anyway, overpaying just means paying more than you need to. Only those earning significantly above average with strong salary prospects should consider extra payments. MoneySavingExpert has a student loan calculator to help you work out if that’s you.

4. Focus on What You Can Control

Your student loan repayment is automatic - there’s not much you can do about the threshold freeze itself. What you can control is understanding the system and making informed decisions about your education and career.

If You’re Considering University Now

All this talk about student loan repayment threshold freeze 2026 might make you nervous about taking out student finance in the first place. But here’s some perspective.

Student loans in the UK work very differently from commercial debt. You never miss a payment (it comes out of your wages automatically), you never pay more than you can afford (9% of earnings above the threshold), and after 30 or 40 years, whatever’s left simply gets written off.

For many people, especially those starting from lower household incomes, student finance opens doors that would otherwise be closed. The funding available can exceed £20,000 per year:

Source: GOV.UK Support with Living Costs 2025-26

The threshold freeze debate is important, but it shouldn’t stop you from pursuing education that could transform your career. Just go in with your eyes open about how repayments work.

Common Myths About Student Loan Threshold Freeze

Myth #1: “The freeze means I’ll pay back my entire loan faster”

➜ Not necessarily. Most Plan 2 borrowers still won’t fully repay before the 30-year write-off. The freeze just means you’ll pay more during that period - not that you’ll clear the debt. For most graduates, the outstanding balance still gets written off. Understand your options before making decisions.

Myth #2: “I should rush to pay off my loan before more freezes happen”

➜ Unless you’re a very high earner who will definitely clear your loan, overpaying could mean giving money away. The loan gets written off after 30 years regardless. Calculate your likely position using official tools before committing extra funds.

Myth #3: “This only affects graduates already working”

➜ The threshold freeze also affects current students who’ll graduate into these rules. If you’re at university now on a Plan 2 loan, this directly impacts your future repayments. Explore course options with full awareness of how repayment works.

FAQs

What is the student loan repayment threshold freeze 2026?

The student loan repayment threshold freeze 2026 refers to the government’s decision to hold the Plan 2 repayment threshold at £29,385 from April 2027 until 2030. This means the salary level at which graduates start repaying won’t rise with wages for three years, resulting in higher lifetime repayments for most borrowers.

How much extra will Plan 2 borrowers pay because of the freeze?

According to the Institute for Fiscal Studies, someone who started university in 2022-23 will pay approximately £3,200 more over their lifetime due to the threshold freezes. Annual extra costs range from around £93 in 2027-28 to £259 by 2029-30.

Will my student loan ever be written off?

Yes. Plan 2 loans are written off 30 years after the April following graduation, regardless of how much you’ve repaid. Plan 5 loans (for those starting after August 2023) are written off after 40 years. The debt is cancelled even if you haven’t paid anything. Check your specific situation with the Student Loans Company.

Should I pay off my student loan early to avoid the freeze impact?

For most graduates, no. Unless you’re certain you’ll fully repay before the 30-year write-off (typically only very high earners), overpaying means paying more than you need to. Use the MoneySavingExpert calculator to assess your specific situation.

Does the threshold freeze affect new students starting in 2026?

Students starting after August 2023 are on Plan 5, which has different terms - a lower threshold (£25,000), lower interest rates (RPI only), but a 40-year write-off period. The Plan 2 threshold freeze specifically affects those who started between September 2012 and July 2023. If you’re considering university now, understand your funding options under the current rules.

Take the Next Step

Thinking about university but worried about student finance?

The headlines about student loan repayment threshold freeze 2026 can be alarming, but understanding how the system actually works puts you in control. Student finance remains one of the most accessible ways to fund higher education - the key is knowing what you’re signing up for.

👉 Download the UniStart app to explore courses with multiple start dates throughout the year

👉 Request a callback from our advisors to discuss your funding questions

“The debate over student loan thresholds shows how important it is to understand what you’re getting into before you apply. The system is complex, but it shouldn’t be a barrier. If you’re an EU citizen with settled status or a UK resident thinking about university, the funding available can be genuinely life-changing - you just need to know how it works.” - Radu Danila, Founder