As outlined in Rachel Reeves’ Budget for 2025, the Plan 2 student loan repayment threshold is due to freeze until 2030. If you’re on a Plan 2 loan, find out what this change really means for you below.
What is a Plan 2 Student Loan?
In England, you’ll be on a Plan 2 student loan repayment plan if your university course started between 1st September 2012 and 31st July 2023, and you:
- Took an undergraduate course
- Took a Postgraduate Certificate of Education (PGCE) course
- Took out an Advanced Learner Loan
- Took out a Higher Education Short Course Loan
Plan 2 loan repayments depend on how much you earn, meaning repayments only start once your earnings go above the threshold.
How do I know which repayment plan I’m on?
To find out which repayment plan you’re on, visit the government website and check each plan’s criteria.
What’s Changing with Plan 2 Student Loans?
The Plan 2 student loan repayment threshold (the minimum income level a graduate must reach before they need to start making repayments towards their loan) is going up from £28,470 to £29,385 per year in April 2026. The threshold will then freeze at this level until April 2030. This freeze is in cash terms, meaning inflation won’t increase the threshold, so repayments may rise faster than your income.
Like before, the amount you repay each month (or year, if you are self-employed) will be 9% of any income you earn over the threshold. If your income varies from month to month, you’ll only make repayments in months where your income goes above the threshold.
What do the Plan 2 Student Loan Changes Mean for You?
Founder of Money Saving Expert, Martin Lewis, says Plan 2 is “the only undergraduate student loan repayment plan designed to mainly charge interest above RPI inflation”.
For example, if your income goes up while the threshold stays the same, this means you will end up paying more each time a repayment is taken. This also means that the amount you repay will rise faster than your take-home pay – because frozen thresholds push more of each pay rise into loan repayments.
For many, especially earlier in their careers, repayments may also fail to keep pace with the interest being added, so the outstanding balance will continue to rise even while regular payments are being made.
Other key changes to your finances include:
- The Rising Cost of Living: With high inflation rates and a rising cost of living, it’s becoming harder for people to stretch their income each month. Add a higher student loan repayment to the mix – and many will be left facing serious money worries.
- Plan 2 Interest Rates: The Plan 2 student loan interest terms haven’t changed, but the rates have. They’re now set at RPI (Retail Price Index) + 3% while studying. Afterwards it moves to tiered rates starting at RPI, rising up to RPI + 3% depending on what you earn. The rate used is usually the prior March’s RPI before the September academic year.
Unintentionally Overpaid? You Could Get £100s Back
The latest Student Loans Company (SLC) figures show there were more than one million overpayments in the 2024/25 tax year. From previous Money Saving Expert ‘Freedom of Information’ requests, they estimate there are at least 5 million who have overpaid. But the good news is it’s easy to get your money back, which you will be eligible to do if…
- Your income changes from month to month (you get commissions or only worked for part of the tax year)
- You’re on the wrong student loan repayment plan by default
- You started repaying your loan too early
- You had money deducted once you cleared your loan
If this sounds like you, check out Money Saving Expert’s Reclaim Overpaid Student Loans Guide or contact Student Finance England directly. You can also find the contact details for Student Finance Wales and Northern Ireland online, as well as the information for Student Awards Agency Scotland.
Worried About Other Debts?
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