Budget 2025 Student Loan Announcements
What the Autumn Budget of 26 November 2025 changed for student loans, and what has happened since
Key Takeaways
- The Autumn Budget 2025 was delivered on 26 November 2025 by then-Chancellor Rachel Reeves. Its headline student loan measure was a three-year freeze of the Plan 2 repayment threshold from 6 April 2027.
- The threshold is frozen at £29,385, the level it rose to in April 2026. Without the freeze it would have risen with RPI each year. It is set to increase again with RPI from April 2030.
- The Budget also froze the Plan 2 interest rate thresholds for three years. That does not increase your monthly repayment, but it increases the interest added to balances for borrowers earning between the two interest thresholds.
- The Institute for Fiscal Studies estimates affected borrowers will repay around £260 more in the 2029-30 tax year. IPPR puts it at around £55 a year more on a £30,000 salary and around £170 more on £40,000 or above by 2029-30.
- The Budget is no longer the latest word. Interest on Plan 2 and Plan 3 loans was capped at 6% from 1 September 2026, the Treasury Committee has called for the freeze to be reversed, and the government changed in July 2026.
In this article
Then-Chancellor Rachel Reeves delivered the Autumn Budget 2025 on 26 November 2025. For student loan borrowers it produced one substantive measure, and it was a costly one: the Plan 2 repayment threshold will be frozen for three years from 6 April 2027, so some students in England and Wales will repay more than they otherwise would have.
This page sets out exactly what was announced, what independent analysts estimate it costs borrowers, and what the Budget deliberately left alone. It also covers what has happened since, because a great deal has: an interest rate cap, a critical select committee report, and a change of Prime Minister and Education Secretary. If you have landed here looking for the current state of student loan policy, read the What Has Happened Since section as well as the Budget itself.
What the Budget Announced
The House of Commons Library summary of the Autumn Budget 2025 records the student loan measure plainly: the repayment threshold for Plan 2 student loans will be frozen for three years from 6 April 2027, meaning some students in England and Wales will repay more than they otherwise would have.
Alongside the repayment threshold freeze, the Budget froze the Plan 2 interest rate thresholds for three years. Those are separate earnings levels that determine how much interest is added to a Plan 2 balance, and freezing them has a different effect on borrowers, explained below.
The measure on the Budget scorecard
The published policy costing line reads: “Student Loans: Freeze Plan 2 repayment threshold for three years from 6 April 2027”. Student loans are accounted for in the public finances in a way that makes the scorecard entries hard to read as annual cash savings, so we do not restate those figures here. A cleaner measure of scale is the cost of undoing it: reversing the freeze would cost around £400m in the medium term and increase public sector borrowing by £5.6bn, according to the OBR and the IFS.
Where to find the primary documents
The full Budget document is published on GOV.UK, and the House of Commons Library briefing CBP-10405 summarises it measure by measure. Both are linked in the Sources section. For how loan terms are changed in law, see our legislative changes guide.
The Plan 2 Threshold Freeze
Plan 2 borrowers repay 9% of everything they earn above the repayment threshold. When the threshold rises with inflation, repayments stay roughly flat in real terms. When it is frozen and wages keep rising, more of your salary sits above the threshold every year and your repayment climbs without any rate ever changing. That is the whole mechanism.
What happens to the Plan 2 threshold
| Period | Threshold | Status |
|---|---|---|
| 2026-27 (now) | £29,385 | In force, 9% above the threshold |
| From 6 April 2027 | £29,385 | Frozen for three years by Budget 2025 |
| From April 2030 | RPI-linked | Set to increase with RPI again |
The freeze applies to Plan 2 borrowers in England and Wales. Without it, the threshold would have risen with RPI in April 2027, 2028 and 2029.
For the full mechanics and worked examples, see our dedicated Plan 2 threshold freeze guide, or run your own salary through the monthly repayment calculator.
The Interest Threshold Freeze
This second measure got far less coverage and is easy to miss. Plan 2 interest is not a single rate. It varies by income between two earnings thresholds: at the lower end it is the RPI basis, and it rises on a sliding scale to a maximum for the highest earners. Budget 2025 froze those two interest thresholds for three years as well.
Why this is different from the repayment freeze: as the IFS points out, freezing the interest thresholds does not increase anyone's monthly repayment. What it does is increase the interest accruing on the balances of borrowers earning between the two interest thresholds, because a frozen scale pushes rising salaries further up the interest taper. Your payslip is unaffected; your balance grows faster.
Whether that matters to you depends entirely on whether you are on track to clear your balance before write-off. If you will never repay in full, faster interest accrual changes very little. If you will repay in full, it costs you real money. Our student loan interest rates guide sets out the current rates on every plan.
What the Freeze Costs Borrowers
Two independent bodies have published estimates. They use different framings, so both are worth reading.
Institute for Fiscal Studies
In the 2029-30 tax year, when the threshold would otherwise have been expected to reach around £32,265, affected borrowers can expect to repay around £260 more than they would have without the freeze.
IPPR
Someone earning £30,000 would pay around £55 a year more by 2029-30. Someone on £40,000 or more would pay around £170 more.
The pattern is what you would expect from a threshold freeze: the cash cost rises with earnings, because a higher earner has more salary sitting above the frozen line. It is also cumulative. Each year the freeze runs, the gap between the frozen threshold and where the threshold would have been widens, so the annual cost is smallest in 2027-28 and largest in 2029-30.
The fiscal counterweight: reversing the freeze would cost around £400m in the medium term and increase public sector borrowing by £5.6bn, on OBR and IFS figures. That gap between a modest medium-term cost and a large borrowing effect is the reason the measure has proved politically sticky despite sustained criticism.
What the Budget Did Not Change
The freeze is a Plan 2 measure only. If you are on any other plan, the Budget did not change your repayment terms. Here is where every plan stands for 2026-27.
| Plan | Threshold | Rate | Write-off |
|---|---|---|---|
| Plan 1 | £26,900 | 9% above threshold | 25 years |
| Plan 2 | £29,385 | 9% above threshold | 30 years |
| Plan 4 | £33,795 | 9% above threshold | 30 years |
| Plan 5 | £25,000 | 9% above threshold | 40 years |
| Postgraduate (Plan 3) | £21,000 | 6% above threshold | 30 years |
Plan 5
The Plan 5 threshold is £25,000 and is frozen. Budget 2025 did not announce a review date for it, and no review date has been published since, so treat £25,000 as the planning figure until the government says otherwise. Plan 5 interest is RPI only, currently a 4.1% basis (March 2026 RPI, in force since 1 September 2026, up from 3.2% the year before).
Postgraduate loans
The postgraduate loan threshold remains £21,000, repaid at 6% above it. No change to that threshold was announced at Budget 2025 and none has been announced since.
Tuition fees
The maximum full-time tuition fee was £9,535 in 2025/26 and is £9,790 in 2026/27. See our 2026-27 academic year changes for the full picture.
What Has Happened Since
A lot has moved since November 2025. If you are reading this in 2026, the Budget is the starting point of the story rather than the end of it.
7 April 2026: interest capped at 6%
The government capped interest on Plan 2 and Plan 3 (postgraduate) loans at 6% from 1 September 2026 for the 2026/27 academic year, instead of the usual RPI plus 3% maximum. The cap applies in England and Wales only and does not apply to Plan 1, Plan 4 or Plan 5. Details are in our interest rates guide.
7 July 2026: the Treasury Committee reports
The House of Commons Treasury Committee concluded that the government has a moral obligation to reverse the freeze at the next Budget, and found that the conduct of the Department for Education and the Student Loans Company amounted to mis-selling in three instances. Read the full findings in our coverage of the Treasury Committee student loans report.
20 July 2026: a change of government
Andy Burnham became Prime Minister, replacing Sir Keir Starmer, and Lucy Powell became Education Secretary. Rachel Reeves is no longer Chancellor. The freeze announced in her Budget remains government policy, but the ministers who would have to defend or reverse it have changed. We have set out the realistic options in what the new government could do on student loans.
28 July 2026: the Education Secretary responds
Lucy Powell said Plan 2 interest is “egregious” and “needs looking at”, while adding that she “can't make any promises”. No formal review has been announced. See Lucy Powell on student loan interest for what was and was not committed to.
Where that leaves you: the freeze from 6 April 2027 has not been reversed. Ministers have expressed sympathy and a select committee has recommended reversal, but neither changes the law. Plan your finances on the current rules, not on a reversal that has not happened.
Sources
- House of Commons Library, Autumn Budget 2025: A summary (CBP-10405). researchbriefings.files.parliament.uk
- GOV.UK, Budget 2025 document. gov.uk
- GOV.UK, “Interest rate cap introduced to protect Plan 2 borrowers”, 7 April 2026. gov.uk
- Treasury Committee news release, “Government has moral obligation to reverse freezing of student loans repayment threshold”, 7 July 2026. committees.parliament.uk
Borrower cost estimates are from published Institute for Fiscal Studies and IPPR analysis of the Budget 2025 threshold freeze. The cost of reversal is from OBR and IFS figures.
Frequently Asked Questions
When was the Autumn Budget 2025 delivered?▼
The Autumn Budget 2025 was delivered on 26 November 2025 by then-Chancellor Rachel Reeves. It is summarised in House of Commons Library briefing CBP-10405.
What did Budget 2025 change about student loans?▼
Two things. The Plan 2 repayment threshold will be frozen for three years from 6 April 2027 at £29,385, the level it rose to in April 2026, rather than rising with RPI. The Budget also froze the Plan 2 interest rate thresholds for three years. The threshold is set to increase with RPI again from April 2030.
How much more will the Plan 2 threshold freeze cost me?▼
The IFS estimates that in the 2029-30 tax year, when the threshold would otherwise have been expected to reach around £32,265, affected borrowers can expect to repay around £260 more. IPPR estimates around £55 a year more for someone earning £30,000 by 2029-30, and around £170 more for someone on £40,000 or above.
Does the freeze affect Plan 1, Plan 4, Plan 5 or postgraduate loans?▼
No. The freeze applies to Plan 2 only. For 2026-27 the Plan 1 threshold is £26,900, Plan 4 is £33,795 and Plan 5 is £25,000, all repaid at 9% above the threshold, and the postgraduate threshold is £21,000 repaid at 6%. The Plan 5 threshold is frozen at £25,000, but Budget 2025 did not set a review date for it.
Does freezing the interest thresholds increase my monthly repayment?▼
No. As the IFS notes, freezing the Plan 2 interest rate thresholds does not increase monthly repayments. It increases the interest accruing on the balances of borrowers earning between the two interest thresholds. Your payslip deduction is unchanged; your balance grows faster.
Has the threshold freeze been reversed?▼
No. On 7 July 2026 the Treasury Committee said the government has a moral obligation to reverse it at the next Budget, and on 28 July 2026 Education Secretary Lucy Powell said Plan 2 interest is “egregious” and “needs looking at” while stating she “can't make any promises”. No formal review has been announced and the freeze from 6 April 2027 remains government policy.
Is the Budget still the latest word on student loan policy?▼
No. Three things have happened since. On 7 April 2026 the government capped Plan 2 and Plan 3 interest at 6% from 1 September 2026 for the 2026/27 academic year in England and Wales. On 7 July 2026 the Treasury Committee called for the freeze to be reversed. On 20 July 2026 Andy Burnham became Prime Minister and Lucy Powell became Education Secretary.
Related Resources
Plan 2 Threshold Freeze Guide
The full mechanics of the 2027 to 2030 freeze and what it costs you
Treasury Committee Report
Why MPs say the freeze must be reversed and loans were mis-sold
Lucy Powell on Loan Interest
What the Education Secretary said, and what she did not commit to
Reform Options for the New Government
What Andy Burnham's government could realistically change
Student Loan Interest Rates
Current rates on every plan and how the 6% cap works
2026-27 Academic Year Changes
Thresholds, fees and loan amounts for the current academic year
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.