Government Response: Loan Terms Will Be Spelled Out, but the Threshold Freeze Is Still Undecided
Ministers have agreed to tell future applicants in plain terms that student loan terms can be changed by later governments. On the Plan 2 freeze that costs graduates money from April 2027, they neither agreed nor refused.
Key Takeaways
- The Government published its response on 13 September 2026. It is a joint HM Treasury and Department for Education reply to the Treasury Committee’s 7 July report, received by the Committee on 7 September and printed as its First Special Report of Session 2026–27.
- The firm commitment is about disclosure, not money. The Student Loans Company will state during the application process that the Government can and does change loan terms retrospectively. That change is planned for spring 2027.
- On the Plan 2 threshold freeze, the Government neither accepted nor rejected the Committee’s recommendation. It said it keeps all aspects of the student finance system under review. The Committee reads that as the Treasury not ruling a reversal out. It is not a promise of one.
- Four recommendations were turned down outright: applying the FCA Consumer Duty to loan promotions, moving to a 50:50 funding split, issuing loans as contracts rather than under statute, and adding write-off estimates to annual statements. Switching interest from RPI to CPI was “noted” rather than accepted.
- Nothing in the response changes a payslip. The Plan 2 threshold is £29,385, the repayment rate is 9% of everything above it, and the freeze from April 2027 to April 2030 remains government policy.
In this article
What the Government Published
On 13 September 2026 the Treasury Committee published the Government’s reply to its student loans inquiry. It is a joint response from HM Treasury and the Department for Education, it was received by the Committee on 7 September, and it appears as the Committee’s First Special Report of Session 2026–27, printed alongside the original report.
The honest summary is that the Government conceded the argument about information and declined to concede the argument about money. Prospective students will in future be told plainly that the terms of their loan can be changed by a later government. Graduates already on Plan 2 got no decision at all on the freeze that starts costing them in April 2027.
The one-line version
The Committee’s own summary of the reply is that the Government “does not reject this recommendation outright but says that all aspects of the student finance system are under review”. That is the whole story on the freeze: no reversal, no refusal.
For the report this responds to — the mis-selling findings, the 52,000 survey responses and the recommendations themselves — see our coverage of the Treasury Committee student loans report of 7 July 2026. This page covers the September reply, which is a separate document and a separate event.
What the Government Accepted
Three things were genuinely conceded. All three are about what applicants are told, and all three land in 2027 or later.
1. The application process will say the terms can change
The Committee asked that the SLC spell out in its application “speedbumps” that the Government can and does change loan terms retrospectively. The Government replied that it accepts this “would be a positive addition” and will work with the SLC and the devolved authorities to make the change as part of a user-centred review of the pre-application process, planned for spring 2027 under the SLC’s transformation programme, Enable.
2. Guidance will be rewritten to be “fair, clear, unambiguous”
The Government agreed that more can be done to help borrowers understand the system and that all information given to them should be “fair, clear, unambiguous and as easy to understand as possible”. It specifically committed to making it more prominent that student finance is governed by legislation and that the regulations may be amended by Government and Parliament.
3. Better information on how life and career choices affect repayments
Having refused the Committee’s actual request (a write-off estimate on annual statements), the Government offered an alternative: it will improve the information given to prospective borrowers to show how salary progression, retraining, moving to part-time work or a career break change a repayment trajectory. It also said it will update the application form and guidance to reflect who is legally responsible for what, as part of the planned updates for the 2027/28 application cycle.
Who this helps: people who have not yet applied. None of it alters a threshold, an interest rate or a write-off date for anyone already repaying. If you want the kind of lifetime picture the Committee asked the SLC to provide, you can build it yourself now with our career progression calculator.
The Threshold Freeze: Not Ruled Out, Not Reversed
This is the part that matters to money, and it is the part where nothing was decided. The Committee had recommended that the Government reverse the repayment threshold freeze at the Autumn Budget, putting the annual cost of doing so at £355 million by 2029–30, and calling it a moral obligation.
The Government did not say yes and did not say no. Its answer, in full substance, was that it recognises the cost-of-living challenges faced by many graduates, that it keeps all aspects of the student finance system under review, that decisions must sit alongside wider fiscal priorities and the long-term sustainability of the system, and that it will continue to consider opportunities to ensure fairness for borrowers, taxpayers and the public finances.
Decided versus still open
Decided
The freeze remains government policy. The Plan 2 threshold stays at £29,385 for the tax years starting April 2027, 2028 and 2029, with the first uprating due in April 2030.
Still open
Whether a future Budget undoes it. The Government has left the door ajar rather than walked through it, and has attached no timetable, no figure and no commitment.
“Importantly, the Treasury has not ruled out reversing the threshold freeze but instead says the whole student finance system is under review. I recognise that finances are tight but I continue to urge the Chancellor to look at this again. I sincerely hope he will use his upcoming Budget to give graduates some much-needed breathing space.”
Dame Meg Hillier, Chair of the Treasury Committee
Read that carefully. “Has not ruled out” is a description of silence, not of intent. The Committee Chair is reading the absence of a refusal as room to keep pressing, which is a reasonable thing for a select committee chair to do. It is not a reason for a graduate to budget differently.
It is worth noting the one argument the Government did make in its own defence on thresholds: it pointed out that it raised the Plan 2 threshold to £28,470 in April 2025, the first increase since 2021, and again to £29,385 this year. Both of those are real. Neither of them is the freeze, which bites from April 2027.
Work out your own exposure: the mechanics of the freeze, and what it costs at different salaries, are set out in our Plan 2 threshold freeze guide. To see what you pay today, run your salary through the monthly repayment calculator.
What the Government Rejected
More of the report was refused than accepted. These are the refusals, with the reason the Government gave for each.
| Committee recommendation | Outcome | Reason given |
|---|---|---|
| Apply the FCA Consumer Duty and financial promotions rules to loan materials | Rejected | Those regimes were built for commercial products in competitive markets and are “not well suited” to a statutory, taxpayer-backed scheme |
| Return the funding balance to a 50:50 split between graduate and state | Not accepted | Would carry a “substantial fiscal cost”; the Government puts its own overall contribution at around 35% to 40% |
| Issue future loans as contracts rather than under statute | Rejected | Would break the employer-based collection mechanism and be “administratively prohibitive” |
| Put an estimate of how much will be written off on annual statements | Rejected | Would need too many assumptions about a person’s future and could be “potentially, misleading” |
| Abandon RPI in favour of CPI for loan interest | Noted only | The ONS will bring CPIH methods and data sources into RPI from February 2030; the Government will “continue to consider” the treatment of inflation measures |
The RPI point in practice: “Noted” is not “accepted”. Interest on every UK student loan plan is still anchored to RPI, currently 4.1% for the rate period running to 31 August 2027, with a 6% cap on Plan 2 and Plan 3 since 1 September 2026. The February 2030 alignment the Government points to is an ONS statistical change, not a student loan policy change. Current figures for every plan are in our student loan interest rates guide.
The gap on the 95:5 question
The Committee heard evidence that some students graduating today could end up bearing as much as 95% of the cost of their degree. The Government’s response puts the taxpayer subsidy on Plan 2 and Plan 5 loans at roughly 30% to 40% of loan outlay, measured by the RAB charge, and the overall government contribution at around 35% to 40% once teaching grants and other support are counted.
Those two numbers are not measuring the same thing, which is why they can sit so far apart. The Committee’s figure describes an individual high-earning graduate who repays in full; the Government’s describes the average across the whole cohort, most of whom never clear the balance. Both can be true. Neither settles the argument.
Reactions
Martin Lewis
“This is very disappointing and does little to help the millions already struggling with student loans, after years of degradation of the terms they signed up to by successive governments. Most urgently, it doesn’t address the coming immoral freeze of the ‘Plan 2’ repayment threshold announced by Rachel Reeves, due to start next April.”
“Of course, I welcome the small crumbs it has given that at least future students will be told in plain English, before they sign up, that the amount they repay can be altered after the event. But let’s be clear: better information for future students will not fix the existing ‘Plan 2’ student loan crisis. The repayment threshold needs to rise, interest needs to fall, maintenance support needs uprating, and the whole system requires a fundamental reset.”
Martin Lewis, founder of MoneySavingExpert, 13 September 2026
Treasury Committee
“The commitment to right a historical wrong by updating the information so that prospective students are properly informed before taking out a massive loan is an important step forward.”
“Unfortunately, though, it doesn’t help graduates who are angry that they didn’t receive the same service and are now facing punitive repayment terms on a loan which keeps growing. And they are juggling that stress with other huge pressures like trying to get on the housing ladder and save for a pension. I say it again, we must give young people a fair chance.”
Dame Meg Hillier, Chair of the Treasury Committee
Government
A government spokesperson, quoted by MoneySavingExpert, said ministers were taking decisive action to improve the student finance system, pointing to increases in maximum maintenance loans, the reintroduction of targeted maintenance grants, and raising the Plan 2 repayment threshold for the first time since 2021. None of those points addresses the freeze that begins in April 2027.
How This Differs From the July Report
These are two different documents published two months apart, and they carry different weight. The July report was MPs telling the Government what to do. The September response is the Government saying what it will actually do.
| 7 July 2026 | 13 September 2026 | |
|---|---|---|
| Document | Committee report, Student loans: Broken and unfair? | Government response, printed as a Special Report |
| Author | Treasury Committee (cross-party MPs) | HM Treasury and the Department for Education jointly |
| Headline finding | Loans were mis-sold; reversing the freeze is a moral obligation | Disclosure will improve; the freeze stays under review |
| Force | Recommendation only | Statement of policy intent; still not law |
| Effect on repayments | None | None |
If you have not read the underlying findings, start with our write-up of the July Treasury Committee report — the three mis-selling findings, the 52,000 survey responses and the recommendations this response is answering. For the longer-running political argument behind it, see Martin Lewis versus Rachel Reeves on the Plan 2 threshold.
What This Means for Your Repayments
Nothing about your deductions changes because of this response. Here is the state of play.
Settled right now
- Plan 2 threshold is £29,385 for 2026-27
- Repayment rate is 9% above the threshold
- Plan 2 and Plan 3 interest is capped at 6% since 1 September 2026
- The April 2027 to April 2030 freeze remains policy
- Loan interest stays RPI-linked, currently 4.1%
Still open
- Whether any Budget reverses the freeze
- Whether interest ever moves from RPI to CPI
- What the improved pre-application information looks like in spring 2027
- Whether any change would be retrospective or apply to new borrowers only
Practical advice: treat “not ruled out” as what it is, which is nothing you can spend. Do not delay a decision about voluntary overpayments on the strength of a possible Budget measure. That calculation still turns on whether you are on course to clear your balance before write-off. Check where you actually stand with the interest calculator, and read the plan rules that apply to you on our Plan 2 page.
One thing the response does usefully confirm: the Government intends to keep the power to change loan terms, and said so in terms. It argued it needs to be able to adapt the system to changing economic circumstances. Whatever you think of that, plan on the rules as they are written today rather than the rules you were shown when you applied.
Sources
- Treasury Committee, Student loans: Broken and unfair? Government response, First Special Report of Session 2026–27, published 13 September 2026. publications.parliament.uk
- Treasury Committee news release, “Government agrees to change how student loans are presented to prospective students”, 13 September 2026. committees.parliament.uk
- MoneySavingExpert, “Martin Lewis: Disappointing Government student loans pledge does very little to help the millions already struggling”, 13 September 2026. moneysavingexpert.com
- Times Higher Education, “UK government to clarify terms of ‘mis-sold’ student loans”, 13 September 2026. timeshighereducation.com
- Treasury Committee, Student loans: Broken and unfair?, First Report of Session 2026–27 (HC 14), published 7 July 2026. publications.parliament.uk
- HMRC, rates and thresholds for employers 2026 to 2027, for all threshold figures. gov.uk
Frequently Asked Questions
Has the Government scrapped the Plan 2 threshold freeze?▼
No. It has not scrapped it and it has not ruled out scrapping it. The response said the Government recognises the cost-of-living challenges graduates face and keeps all aspects of the student finance system under review. The Treasury Committee described that as not rejecting the recommendation outright. The freeze from April 2027 to April 2030 remains government policy, and your Plan 2 threshold is £29,385 today.
What did the Government actually commit to?▼
Three disclosure changes. The Student Loans Company application process will state that the Government can and does change loan terms retrospectively, planned for spring 2027 under the SLC’s Enable programme. Guidance will be rewritten so that information is fair, clear and unambiguous, and makes it more prominent that student finance is governed by legislation that Government and Parliament can amend. And prospective borrowers will get better information on how salary progression, retraining, part-time work or career breaks affect repayments.
Does any of this change what I repay each month?▼
No. Every change in the response is about information given to future applicants, and the earliest of them lands in spring 2027. Your Plan 2 threshold is £29,385, your repayment rate is 9% of everything above it, and Plan 2 and Plan 3 interest is capped at 6% until the cap lapses.
Why did the Government refuse to apply the FCA Consumer Duty?▼
It argued there is a strong rationale for not doing so: the Consumer Duty and the financial promotions regime were designed for commercial products sold in competitive markets, while student finance is a statutory, taxpayer-supported scheme that lends to every eligible applicant regardless of credit history, with repayments set by earnings rather than by the amount borrowed. Martin Lewis called that refusal disappointing and suggested some government practices would fall foul of those rules.
Is student loan interest moving from RPI to CPI?▼
Not as a result of this response. The Government “noted” the recommendation rather than accepting it, pointed out that the ONS will bring CPIH methods and data sources into RPI from February 2030, and said it will continue to consider the treatment of inflation measures. Interest on every plan remains RPI-linked, currently 4.1% for the period to 31 August 2027.
How is this different from the July Treasury Committee report?▼
The July report was the Treasury Committee’s own findings, including that loan communications amounted to mis-selling and that reversing the freeze was a moral obligation. This September document is the Government’s formal reply to it, written jointly by HM Treasury and the Department for Education and published as the Committee’s First Special Report. The report made demands; the response says which ones are being met.
Related Resources
The July 2026 Committee Report
The mis-selling findings and recommendations this response answers
Plan 2 Threshold Freeze Guide
What the April 2027 freeze costs you, year by year
Plan 2 Explained
Thresholds, interest and write-off rules for Plan 2 borrowers
Monthly Repayment Calculator
What you pay today on your salary and plan
Student Loan Calculator UK Editorial Team
Editorial Team
This page is maintained by the Student Loan Calculator UK editorial team, checked against GOV.UK and Student Loans Company guidance. Read more about our editorial approach.