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Last reviewed 2026-09-20

Plan 2 Threshold Freeze 2027: What It Means & Should You Overpay?

At the 2025 Autumn Budget on 26 November 2025, then-Chancellor Rachel Reeves announced that the Plan 2 student loan repayment threshold will be frozen at £29,385 for three years, from April 2027 to April 2030. The interest rate bands (£29,385 lower and £52,885 upper) are also frozen for the same period. This is the biggest change to Plan 2 since the 2022 reform, and it will cost the average borrower around £3,000 more in lifetime repayments.

Quick summary: The threshold was meant to rise with inflation. Instead, it stays at £29,385 for three years. This is “fiscal drag”: as your salary rises with inflation, a bigger slice of it gets caught above the frozen threshold, so you repay more each year.

What exactly changed?

The Plan 2 threshold was supposed to uprate annually with RPI inflation from 2018 onwards. Instead:

  • April 2026: Threshold rises to £29,385 (already in effect)
  • April 2027, 2028, 2029: Threshold frozen at £29,385, with no uprating
  • April 2030: RPI uprating resumes
  • The interest rate bands (£29,385 and £52,885) are also frozen for the same period

Who is affected?

Anyone with a Plan 2 student loan, meaning anyone who started an undergraduate course in England between September 2012 and July 2023, and anyone who started an undergraduate course in Wales from September 2012 onwards. That is several million graduates and current borrowers.

Welsh borrowers: position not yet confirmed. The freeze was announced by HM Treasury at the Autumn Budget 2025, but repayment thresholds for Welsh borrowers are set by the Welsh Government rather than by Westminster. We have not found a published Welsh position either way, so we are not going to tell you Wales is exempt. If you took your loan out in Wales, check the current Student Finance Wales guidance before you plan around this.

How much more will you repay?

The IFS (Institute for Fiscal Studies) has modelled the impact. Their findings:

  • Average lifetime increase: ~£3,000 (in today's prices) for the 2022 university entry cohort
  • Worst hit: Borrowers in the third decile of lifetime earnings, typically mid-level graduate salaries just above the threshold, repay around £5,000 more on average over 30 years
  • Higher earners: May actually repay less in total, because the faster repayment schedule means less interest accrues over time

Worked example: the fiscal drag effect

For a typical earner whose salary rises roughly with inflation (using Martin Lewis / MSE numbers):

WhenSalaryThresholdAnnual repayment
April 2026£29,300£29,385£0 (below threshold)
April 2027£30,200£29,385 (frozen)£73
April 2028£31,100£29,385 (frozen)£154
April 2029£32,000£29,385 (frozen)£235
April 2030£32,900Uprated with RPI againFalls back below £316 once the threshold rises

Illustrative example. Actual salary growth will vary, and the April 2030 threshold is not yet announced. Repayment figures are 9% of gross pay above the threshold shown. Based on MSE / Martin Lewis analysis.

Should you overpay your Plan 2 loan before April 2027?

This is the question on most borrowers' minds. The answer depends entirely on whether you will repay your loan in full within the 30-year write-off period.

Yes, consider overpaying if:

  • You're a high earner (typically £50k+ early career, rising to £80k+)
  • You're likely to clear your loan within 30 years anyway
  • You have savings earning less than your loan interest rate (Plan 2 would otherwise run from 4.1% up to 7.1% depending on income, but has been capped at 6% since 1 September 2026)
  • You're close to clearing the loan and want to avoid further interest

Do NOT overpay if:

  • You earn below ~£45k and are likely to have a balance written off after 30 years
  • You have higher-interest debts (credit cards, personal loans): clear those first
  • You don't have an emergency fund
  • You might need the money for a house deposit, pension, or other priority

Key insight: Student loan “debt” behaves more like a graduate tax than a conventional loan. Only around a third of Plan 2 borrowers are expected to repay in full. If you're in the other two-thirds, voluntary overpayments are essentially wasted money: your loan will be written off regardless.

Use our Plan 2 overpayment calculator to model your scenario →

Is this “mis-selling”?

Many borrowers, particularly those who started between 2012 and 2015, were told the threshold would rise with average earnings. The IFS notes that if the original 2012 promise had been kept, the threshold would now be well above £40,000, and far fewer people would be repaying. Some campaigners and MPs have called the change “mis-selling”.

However, the loan terms explicitly allow the government to change repayment regulations. A parliamentary inquiry into student loans in England was launched in March 2026 amid “widespread dissatisfaction” over repayment terms. The BBC also found the government had compared loan repayments to a “£30 phone contract” in schools a decade ago.

Frequently asked questions

When is the Plan 2 threshold frozen?

The Plan 2 repayment threshold is frozen at £29,385 for three years, from April 2027 to April 2030. It rose to £29,385 in April 2026 (already in effect), then stays at that level until April 2030, when RPI uprating resumes.

Does the Plan 2 threshold freeze affect Welsh borrowers?

This is not yet settled. The freeze was announced by HM Treasury at the Autumn Budget 2025, and repayment thresholds for Welsh borrowers are set by the Welsh Government rather than by Westminster. We have not been able to confirm a published Welsh position either way, so Welsh Plan 2 borrowers should check the latest Student Finance Wales guidance rather than assume they are covered or exempt.

Should I overpay my Plan 2 loan before April 2027?

It depends on whether you are likely to repay your loan in full within 30 years. High earners who will clear the loan should consider overpaying to reduce interest. Low and mid-earners whose loans will be written off should generally not overpay, as the money is effectively wasted. Use an overpayment calculator to model your scenario.

How much more will I repay because of the Plan 2 freeze?

The IFS estimates the freeze increases average lifetime repayments by around £3,000 for the 2022 university entry cohort. Borrowers in the third decile of lifetime earnings are hit hardest, repaying around £5,000 more on average over 30 years.

Sources

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