Graduates repaying Plan 2 loans will still begin making repayments on earnings above £29,385 a year from April 6, 2027. The Student Loans Company, which administers government student finance, confirmed the amount on November 12.
The threshold is the part of a person's earnings left out of the repayment calculation. Above it, Plan 2 borrowers repay 9% of their income. The repayment does not depend on how large the outstanding debt is, provided there is still a loan to repay.
Freezing that earnings limit matters when wages rise. More of a graduate's pay falls into the part counted for repayments, while the amount protected from deductions stays the same.
Daylight Post found that the first year of the freeze can cost a Plan 2 borrower about £108 more than a rising threshold would, using the government's forecast and the published repayment formula. The difference is smaller for people earning only just above the frozen limit, and zero for people below it.
What the freeze changes
The freeze was announced in the UK government's November 2025 Budget for three years from April 2027. This week's announcement confirms the amount for 2027-28. It is not a new deduction beginning this month.
An impact assessment published by the Welsh government on November 11 says the threshold would otherwise be forecast to reach £30,590 in April 2027. Holding it at £29,385 leaves £1,205 more of a borrower's annual earnings exposed to the 9% repayment rate.
For someone earning at least £30,590, that works out at £108.45 extra over a year before payroll rounding. At £30,000, the frozen threshold produces a repayment while the forecast higher threshold would produce none.
| Annual earnings | Frozen £29,385 threshold | Forecast £30,590 threshold |
|---|---|---|
| £30,000 | £55.35 | £0 |
| £33,000 | £325.35 | £216.90 |
| £50,000 | £1,855.35 | £1,746.90 |
These examples assume the same annual earnings in each comparison and an outstanding Plan 2 loan throughout. Employers calculate deductions each pay period and round them down to whole pounds, so actual payslip totals can differ from the annual illustrations.
If a graduate's pay stays unchanged, keeping the same threshold does not itself increase their payment compared with this year. It removes the reduction they would have received if the threshold had risen.
Newer borrowers get some relief
The announcement treats Plan 5 differently. Its threshold will rise from £25,000 to £26,025 next April. That means some earnings currently counted for repayment will be left out.
For undergraduate borrowers funded by Student Finance England, Plan 5 generally covers courses begun on or after August 1, 2023. Plan 2 generally covers those begun between September 1, 2012 and July 31, 2023. Welsh-funded undergraduate courses begun from September 2012 remain on Plan 2. The funding body and course start date matter, rather than where a graduate lives now.
Both plans use a 9% repayment rate. Even after the Plan 5 threshold rises, someone earning £30,000 would repay £357.75 under its annual formula, compared with £55.35 under Plan 2. Those figures use the same before-rounding method as the table.
The newer plan's lower threshold therefore still takes more from the same earnings. It also has different interest and cancellation rules: remaining Plan 5 debt is normally canceled 40 years after the April when repayments first became due, compared with 30 years from that point for Plan 2. A one-year repayment comparison is not the total cost of either loan.
The burden does not fall evenly
The Welsh assessment uses UK-government forecasts for borrowers who began study in 2022-23. It projects larger percentage increases in lifetime repayments for low- and middle-earning graduates than for the highest earners. Those are modeled outcomes for that group, not an observed increase for every borrower.
That difference follows partly from how income-based repayment works. Graduates who would otherwise reach the cancellation date can repay more in total before that existing date, without clearing the debt. Someone who earns enough to clear the loan may instead finish repaying earlier.
The UK government presented the freeze as part of its wider measures to strengthen public finances. For a working graduate, its effect appears in the money left after deductions, even though the repayment rate stays at 9%.
Postgraduate loans have a separate 6% repayment rate and a £21,000 threshold, also unchanged for 2027-28. A graduate with both an undergraduate and a postgraduate loan can face both deductions at once.