Source: Abby Wilson, MoneySavingExpert, “Martin Lewis warns new Government pledge to provide clearer student loans info in future will NOT fix the existing ‘Plan 2’ crisis”, published 13 September 2026, reporting HM Treasury and the Department for Education's formal response to the House of Commons Treasury Committee's report on student loans. Threshold and interest figures below are taken directly from GOV.UK: repaying your student loan, checked 14 September 2026.
Our view
Plan 2 borrowers already knew, from the Autumn Budget 2025, that their repayment threshold would be frozen at £29,385 for three years from April 2027 instead of rising with earnings as it's supposed to. What's new this week is that a cross-party committee of MPs looked at that decision, called the wider system “broken and unfair”, and asked the Government to reverse it. The Government's published response declined, and offered clearer information for future students. For the roughly two million people already on Plan 2, the freeze is now confirmed.
What the committee said
The Treasury Committee's report, titled ‘Student loans: Broken and unfair?’, examined how the system has drifted since Plan 2 launched in 2012. Ministers describe the taxpayer subsidy on student loans as being “in the region of 30% to 40%” of the cost, while evidence put to the committee suggested some students graduating today could end up contributing as much as 95% of the cost of their course. The committee's complaint is that policy is still set on the first figure.
The Government's written response, published 13 September 2026, did not dispute the committee's numbers directly. It committed to one change — plainer, clearer information for prospective students making it explicit that loan terms can be altered after they've signed up — and declined to reverse the threshold freeze itself. Martin Lewis, whose evidence was also submitted to the inquiry, called the response “very disappointing” and said better information for future students “does little to help” the roughly two million people already repaying under terms that have shifted since they took the loan out. His list of what he wants instead is specific: the threshold needs to rise, interest needs to fall, maintenance support needs uprating, and the system needs what he called a fundamental reset. The Government has not proposed any of these.
What the freeze does to your payslip
Plan 2 repayments are 9% of everything you earn above the threshold — currently £29,385 a year, or £2,448.75 a month, checked on GOV.UK for 2026-27. Normally that threshold is meant to rise roughly in line with earnings each year, so someone getting an ordinary pay rise stays in roughly the same position relative to it. With the threshold frozen for three years, every pound of pay rise above £29,385 has 9% deducted.
Illustrative figures only, built on the published 2026-27 threshold of £29,385 held flat for three years as announced, against an assumed 4% annual pay rise — roughly in line with recent average UK earnings growth — purely to show the shape of the effect. Your own numbers depend on your pay.
- 2026-27, salary £32,000: £2,615 above threshold × 9% = £235 a year, about £20 a month.
- 2027-28, salary £33,280 (threshold still £29,385): £3,895 above threshold × 9% = £351 a year, about £29 a month.
- 2028-29, salary £34,611 (threshold still £29,385): £5,226 above threshold × 9% = £470 a year, about £39 a month.
- 2029-30, salary £35,995 (threshold still £29,385): £6,610 above threshold × 9% = £595 a year, about £50 a month.
Gross pay rose by £3,995 over those three years of ordinary pay rises. Loan repayments rose by £360 over the same period, nearly a tenth of the extra pay. Had the threshold risen in line with pay instead of freezing, the monthly deduction by year four would be roughly £22 rather than £50 — about £28 a month lower.
Your marginal rate
If you're a Plan 2 graduate earning between £29,385 and £50,270, every extra pound you earn — a pay rise, overtime, a bonus, a side income taxed through PAYE — is reduced by 20% basic-rate income tax, 8% employee National Insurance, and now 9% student loan repayment. That's 37p in every extra pound gone before it reaches your account.
Salary sacrifice
If your employer offers a salary sacrifice pension scheme, you agree to a lower contractual salary in exchange for a larger employer pension contribution. Because student loan repayments, like income tax and National Insurance, are calculated on your salary after sacrifice, reducing your headline pay this way reduces your loan repayment too — on top of the tax and National Insurance you'd already save. Sacrificing £100 a month above the threshold reduces loan repayments by £9. This is information, not a recommendation; payroll or HR can tell you whether your scheme offers salary sacrifice, and our pension reality check explains how workplace pensions work. A regulated adviser can help with decisions about pension contributions.
Overpaying the loan
Many Plan 2 borrowers are on the statutory 30-year write-off schedule, where the loan is cancelled regardless of how much has been repaid by that date. For them, the freeze means more is deducted each month; the write-off date has not moved, and voluntary overpayments are not refundable. Our guide covers whether you are on track to clear the balance before the write-off: whether you should ever overpay your student loan.
Three things to do this week
- Check your plan and your current position. Sign in at gov.uk: manage your student loan balance to confirm you're on Plan 2, see your balance, and see where your salary currently sits relative to the £29,385 threshold.
- Ask payroll or HR whether your pension is on salary sacrifice. Salary sacrifice reduces loan repayments as well as tax and NI.
- Allow for the freeze in pay-rise or bonus expectations from April 2027. If you're above the threshold, budget on keeping roughly 63p of every extra pound before pension contributions.
What is still uncertain
The Government says it “keeps all aspects of the student finance system under review”. No review date has been published. The freeze runs from April 2027 for three years on the published figures.
See our guide on whether you should ever overpay your student loan, and if the wider picture of tax, National Insurance and deductions on your payslip is unclear, our payslip guide explains every line. If money is tight enough right now that £20 or £50 a month matters, free, independent help is available today from MoneyHelper, StepChange and National Debtline.