An estimated 5.8 million students and graduates from England and Wales on Plan Two loans now owe more than £40,000 each.
New figures from the Student Loans Company show that those who began university between 2012 and 2022 – and therefore fall under the plan two repayment system – have an average balance of £43,645.
Plan Two graduates currently repay 9% of anything they earn above £28,470 a year. This threshold is set to rise slightly to £29,385 in April.
Under normal circumstances, the threshold would rise annually in line with inflation. However, in her autumn budget last year, Rachel Reeves announced that it would be frozen from April 2027 at £29,385 for three years, until 2030.
This means that many graduates will be pulled into higher monthly repayments as wages rise, but the repayment threshold does not.
Any remaining student loan balance is written off after 30 years, but many graduates face repaying far more than they originally borrowed long before they reach that point.
Junior doctor Luke Carddock borrowed around £77,000 to complete his medical degree. Since graduating in 2023, his loan has accrued more than £29,000 in interest.
Carddock said: “I was told it was one of the best loans that I would ever get, but I haven’t seen my loan go down at all despite repayments.”
Growing interest charges for Plan Two students and graduates have fuelled frustration online and protests.
Outside the Houses of Parliament, protesters dressed as sharks and wearing masks of Reeves chanted: “Stop the freeze, stop freezing, stop freezing, can’t afford to pay anymore,” criticising the threshold freeze and the wider student loan system.
The protest, organised by the National Union of Students, depicted the chancellor as a “loan shark.”
Chloe Ella-Plum, one of the NUS protesters and President of the St Mary’s University Students’ Union, said: “We’re not just paying our loans back, we’re paying all this extra interest. We’re having to pay earlier, more than what we owed, and that doesn’t feel fair.
“I was told to take as much as I could, and that I would eventually pay it back, but that I wouldn’t really notice it.
“As a sabbatical officer, I talk to students, and most don’t fully understand student loans, nor do they know what is currently happening.”
Following what MPs have described as “widespread dissatisfaction,” an inquiry has been launched into the repayment terms of the student loan system.
The Treasury Committee will examine whether the decision to freeze repayment thresholds is fair and whether further reforms are needed.
A government spokesperson had said: “We recognise the concerns among borrowers. The fiscal situation this government inherited means we’ve had to make tough choices. Threshold freezes are part of the hard but fair decisions needed to protect taxpayers and students now and for future generations of students and workers.”
Photo credit: Haris Malekos
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