Plan 2 Threshold Freeze: What It Means For You
The Autumn 2025 Budget confirmed the Plan 2 repayment threshold will be frozen at £29,385 from April 2027 for three years. Here's what that actually means for your monthly student loan repayments.
Current Threshold
£28,470
2025/26 tax year
Frozen At
£29,385
From April 2027 for 3 years
Who Is Affected
Millions
English & Welsh graduates (2012–2023)
Freeze Duration
3 years
April 2027 to March 2030
⚠️⚡ What You Need to Know
If you started university in England or Wales between September 2012 and July 2023, you're on Plan 2. From April 2027, your repayment threshold will be frozen at £29,385 for three years — rather than rising with inflation as originally intended.
This means more of your income will sit above the threshold, so you'll repay more each month than you otherwise would have.
What Is the Threshold Freeze?
Your Plan 2 student loan repayment threshold is the salary level below which you don't make repayments. You repay 9% of everything you earn above it. Currently that threshold is £28,470 per year.
Under the original plan, the threshold was supposed to rise each year in line with the Retail Price Index (RPI), protecting borrowers from "fiscal drag" — the effect where frozen thresholds mean you pay more as wages rise.
However, the Autumn 2025 Budget announced that the Plan 2 threshold will rise to £29,385 in April 2026, then be frozen at that level until at least March 2030. This is the second time the Government has frozen the Plan 2 threshold — a similar freeze occurred between 2016 and 2021 when it was stuck at £21,000.
Threshold Timeline
| Tax Year | Annual Threshold | Monthly Threshold | Status |
|---|---|---|---|
| 2024/25 | £27,295 | £2,274 | Previous |
| 2025/26 | £28,470 | £2,372 | Current |
| 2026/27 | £29,385 | £2,449 | Confirmed rise |
| 2027/28 | £29,385 | £2,449 | Frozen |
| 2028/29 | £29,385 | £2,449 | Frozen |
| 2029/30 | £29,385 | £2,449 | Frozen |
After March 2030, the Government has not yet confirmed what will happen. It may rise again with RPI, or be frozen further.
How the Freeze Affects Your Repayments
The freeze means your threshold won't keep pace with earnings growth. If your salary rises with inflation but the threshold stays fixed, an increasing share of your income sits above the threshold — and you repay 9% of that bigger slice.
📝 Worked Example: £35,000 Salary with 3% Annual Pay Rises
Without the freeze (threshold rising with RPI at ~3%):
Apr 2027: Salary £35,000 — Threshold ~£30,267 — Repay £426/yr (£35.50/mo)
Apr 2028: Salary £36,050 — Threshold ~£31,175 — Repay £439/yr (£36.58/mo)
Apr 2029: Salary £37,132 — Threshold ~£32,110 — Repay £452/yr (£37.66/mo)
With the freeze (threshold stuck at £29,385):
Apr 2027: Salary £35,000 — Threshold £29,385 — Repay £505/yr (£42.12/mo)
Apr 2028: Salary £36,050 — Threshold £29,385 — Repay £600/yr (£50.00/mo)
Apr 2029: Salary £37,132 — Threshold £29,385 — Repay £697/yr (£58.12/mo)
Over these 3 years, the freeze means you repay approximately £485 more than you would have — and the gap widens each year.
📝 Higher Earner: £55,000 Salary with 3% Annual Pay Rises
Extra repayments caused by the freeze:
Apr 2027: Extra ~£79/yr vs rising threshold
Apr 2028: Extra ~£161/yr vs rising threshold
Apr 2029: Extra ~£245/yr vs rising threshold
Higher earners may actually benefit: extra repayments reduce principal faster, meaning less total interest, but only if you're on track to repay in full, otherwise it is more costly.
See your personal impact. Enter your salary and debt to model exactly how the freeze affects your repayments.
Open Plan 2 Calculator →Who Is Hit Hardest?
The freeze doesn't affect everyone equally. Your salary, career stage, and likely repayment trajectory all matter.
⚡Most Affected: Mid-Earners
Salary range: £29,000–£40,000
Why: You're near the threshold, so the freeze pulls you into repayment territory — or significantly increases what you repay.
Impact: You'll likely repay for the full 30 years regardless, so extra payments are effectively "lost" — they don't reduce your total cost.
Strategy: Don't panic-overpay. Treat the extra as an unavoidable tax increase.
💰Silver Lining: High Earners
Salary range: £50,000+
Why: You were already repaying well above the threshold. The freeze adds modestly to your monthly payments.
Impact: If you're on track to repay in full within 30 years, higher repayments actually clear your loan faster, saving interest.
Strategy: Consider whether overpaying makes sense — use our calculator to model it.
ℹ️Below the threshold?
If you earn below £29,385 and don't expect significant pay rises, the freeze won't affect you at all — you still won't make any repayments. The threshold still protects lower earners.
Should You Overpay Because of the Freeze?
The freeze has prompted widespread discussion about whether Plan 2 borrowers should overpay. The short answer: for most people, no. But for some, it tips the balance.
❌❌ Don't overpay if...
- You borrowed the full tuition + maintenance loan amount
- Your salary is under £40,000 and growing slowly
- You expect career breaks (parental leave, travel, retraining)
- You have higher-interest debt (credit cards, car finance)
- You don't have an emergency fund of 3–6 months' expenses
✅✅ Overpaying may help if...
- You borrowed significantly less than the maximum
- Your salary is £50,000+ and rising
- You can clear a substantial chunk (£10,000+) of the balance
- You expect steady, unbroken employment for 20+ years
- You're already on track to repay within 30 years
For a deeper dive, see our Should I Overpay My Student Loan? guide.
The Bigger Picture: "Fiscal Drag"
This isn't happening in isolation. The Government has also frozen income tax thresholds (extended several times, now until at least April 2028), and the same principle applies: when thresholds don't rise with earnings, you pay more without any rate increase being announced.
For Plan 2 graduates, this creates a "double drag" effect. You pay more income tax and more student loan repayments as your salary grows, even though neither rate has officially changed.
The combined marginal rate for a basic-rate taxpayer on Plan 2 is already significant (20% income tax + 8% NI + 9% student loan + 5% pension auto-enrolment = 42%). The freeze means more graduates will spend more of their career at these rates.
How Does This Compare to Plan 5?
If you started university from August 2023, you're on Plan 5 — a completely different set of rules. Plan 5's threshold is lower at £25,000 (also frozen until at least 2027), but interest is charged at RPI only (no +3% for high earners).
| Plan 2 | Plan 5 | |
|---|---|---|
| Threshold (2026/27) | £29,385 (frozen) | £25,000 (frozen) |
| Interest rate | RPI to RPI + 3% | RPI only |
| Write-off period | 30 years | 40 years |
| Threshold freeze | 3 years (2027–2030) | Until at least 2027 |
For a full comparison, see our Plan 2 vs Plan 5 guide.
Key Takeaways
The Plan 2 threshold will be frozen at £29,385 from April 2027 to March 2030
This is a real-terms increase in repayments caused by "fiscal drag" — your threshold doesn't keep pace with wages
Mid-earners (£29k–£40k) are most affected as they get pulled into repayment territory
For most borrowers, panic-overpaying is not the right response — treat it as a small tax increase
High earners on track to repay in full may benefit from the higher repayments reducing interest
This is the second time the Government has frozen Plan 2 thresholds — it happened from 2016 to 2021 as well
Always prioritise emergency savings, pension matching, and high-interest debt before overpaying your student loan
Model the Impact on Your Finances
Enter your salary, debt, and career assumptions to see exactly how the threshold freeze affects your total repayments over the life of your loan.
Related Guides
Should I Overpay My Student Loan?
Decision framework for voluntary overpayments
Learn more →Repayment Thresholds Explained
How thresholds protect lower earners
Learn more →Pension vs Overpayments
Where to put your spare cash
Learn more →Plan 2 vs Plan 5
How the two modern plans compare
Learn more →Salary Sacrifice & Student Loans
Legally reduce your repayments
Learn more →Interest Rates Explained
How interest is calculated on Plan 2
Learn more →