Plan 2 Threshold Freeze: How Much More Will You Repay?

What Changed in the Autumn 2025 Budget

In the Autumn 2025 Budget, the UK government announced that the Plan 2 student loan repayment threshold would be frozen at £29,385 from April 2027 until April 2030. Previously, the threshold was set to rise annually in line with average earnings growth.

In 2026/27 (the final year before the freeze bites), the Plan 2 threshold is £29,385 — a modest rise from £28,470 in 2025/26. From April 2027 onward, this number is locked, even as wages continue to rise with inflation and economic growth.

Who Is on Plan 2?

Plan 2 applies to English and Welsh students who started university between 1 September 2012 and 31 July 2023. It is the most common student loan plan in the UK, covering millions of graduates currently in their 20s and 30s. If you're not sure which plan you're on, check your SLC online account or the deduction code on your payslip (02 = Plan 2).

Plan 2 does not apply to: Scottish students (Plan 4), Northern Irish students (Plan 1), or students who started from August 2023 onward in England (Plan 5).

Plan 2 Threshold: History and Future

How Much Extra Will You Repay? (Modelled)

These projections assume 3% annual salary growth, the Plan 2 threshold frozen at £29,385 from 2027/28, and compare against a counterfactual where the threshold rose at 3% annually (in line with earnings). Starting salary £35,000.

While £484 over 3 years sounds modest, the compounding effect matters more for higher earners, and the freeze may be extended beyond 2030. For someone earning £50,000 by 2030 with a frozen threshold, extra annual repayments could reach £500–£600/year.

Fiscal Drag: The Mechanism

Fiscal drag is the phenomenon where inflation and wage growth push workers into higher tax (or repayment) brackets without any explicit rate change. It is the same mechanism being applied to income tax (where frozen thresholds since 2021/22 have effectively raised millions of people's tax bills without a vote on rates).

For Plan 2 borrowers, fiscal drag means:

• A newly-graduated Plan 2 borrower in 2027 earning £30,000 would owe just £55/year in repayments (9% of £30,000–£29,385)
• By 2030, if their salary has grown to £33,000 and the threshold is still £29,385, they owe £324/year — an increase of £269/year without any policy change
• Every 1% of salary growth generates an extra £26/year in repayments (9% of that 1%)

What Can Plan 2 Borrowers Do?

The threshold freeze is outside your control. What you can control is the income figure used to calculate repayments:

• Salary sacrifice pension contributions reduce your gross income and directly reduce your Plan 2 repayments
• There is no benefit to voluntary overpayments for most Plan 2 borrowers (see our overpayment guide)
• If your income falls temporarily (career break, part-time), repayments pause automatically — you don't lose any benefit by not overpaying

Salary Sacrifice: An Effective Counter to the Freeze

Every pound you sacrifice into a pension reduces your gross income by £1 — and therefore reduces your student loan repayment base by £1. At 9%, a £1,000 salary sacrifice saves £90 in student loan repayments, on top of the income tax and NI savings.