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, before the detail
This is a story about a door closing, not one opening. 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 — and the Government said no. Not “we'll think about it”, but a formal, published response declining to change course, with a consolation prize of better paperwork for people who haven't started university yet. For the roughly two million people already on Plan 2, nothing about their actual repayments has changed for the better, and the one thing that was going to make them worse next year is now confirmed rather than merely proposed.
What the committee actually said
The Treasury Committee's report, titled ‘Student loans: Broken and unfair?’, examined how the system has drifted since Plan 2 launched in 2012. The evidence it heard included a striking gap between how the Government frames the scheme and how it now actually behaves: 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. Those are two very different pictures of the same system, and the committee's central complaint is that policy is still being set as if the first one were true.
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. None of that is on the table.
What the freeze actually does to your payslip
The mechanics are simple, which is exactly why the effect is easy to miss. 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. A freeze breaks that link. Your pay keeps moving; the line that decides how much of it the loan takes does not. Every pound of pay rise that lands above £29,385 is now permanently exposed to the 9% deduction, for three years running, with no equivalent uplift to soften it.
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 actual 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 every extra pound this graduate earned, taken by a threshold that never moved. 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.
The part that catches people out: your real 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, and it's worth knowing that number before you accept a pay rise negotiation, take on extra shifts, or decide how to split a bonus, because the number that lands is smaller than the payslip line implies.
One genuine lever: salary sacrifice
There is a legitimate, well-established way to soften this that most people on Plan 2 have never been told about. 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. Someone sacrificing £100 a month while earning above the threshold keeps £9 of that as a loan-repayment saving alone, and every penny of it still lands in their own pension rather than disappearing. It's coaching-level information, not a product recommendation: ask your payroll or HR team whether your scheme offers salary sacrifice, because not every employer's does, and our pension reality check explains what the wider pension deal is worth before you decide how much to put in.
What this doesn't mean: don't overpay to beat it
The instinct the freeze provokes — clear the balance faster, before it gets worse — is usually the wrong one. Most 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 that majority, a frozen threshold means more comes off automatically each month; it doesn't mean voluntary extra payments suddenly become good value, because the write-off date hasn't moved and voluntary overpayments are not refundable if you change your mind. Work through whether you're actually on track to clear the balance before the write-off in our guide on whether you should ever overpay your student loan — the freeze doesn't change that answer for most people, it just makes the automatic deduction sting more.
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. If it is, and you're earning above the threshold, increasing your sacrifice reduces your loan repayment as well as your tax and NI — a rare case where one decision touches three deductions at once. If it isn't, ask why not; not every scheme offers it, but plenty do without employees realising.
- Rework any pay-rise or bonus expectations for April 2027 onwards. If you're above the threshold, budget on keeping roughly 63p of every extra pound before pension contributions, not the 80p or 92p that income tax alone would suggest.
What is still uncertain
The Government's own language leaves a door open, just not a committed one: it says it “keeps all aspects of the student finance system under review”, which is standard phrasing that stops short of ruling out change at a future Budget or fiscal event. No review date has been published and no trigger for reconsidering the freeze has been set out, so there's nothing to diarise yet. What's settled is the freeze itself, running from April 2027 for three years on the figures currently published, and the Government's decision not to reverse it despite a cross-party committee explicitly asking it to. Plan around the freeze as it stands; treat a reversal as possible, not likely.
If this is the first time you've looked properly at what your loan actually costs month to month rather than the headline balance, start with 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 walks through 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.