Student Loan Threshold Rises to £29,385 — Then Freezes for Four Years. What It Means for Your Repayments

Graduates on Plan 2 student loans are getting a small increase to their repayment threshold from April 2026 — but the relief is temporary, and a four-year freeze that follows will quietly push up repayments for many.

What's changing

From April 2026, repayment thresholds for most student loan plans are rising by 3.2%. The Plan 2 threshold — covering most people who started university in England between 2012 and 2023 — increases to £29,385 for the 2026/27 tax year.

The catch: that threshold is then set to freeze at £29,385 from April 2027 until April 2030. Because wages typically keep rising while the threshold doesn't, this fiscal drag is estimated to cost the average £35,000 earner an extra £80–£250 a year in repayments by the end of the freeze.

Plan 1 borrowers (mostly pre-2012 starters) see their threshold rise to £26,900 for 2026/27, up from £26,065. And April 2026 marks the point at which Plan 5 borrowers — those who started courses after August 2023 — officially become liable for repayments, with a lower threshold of £25,000.

Checklist: what to do about it

• Check which plan you're on. Your plan type (1, 2, 4 or 5) is shown on your Student Loans Company account and determines your threshold and interest rate.
• Use the official repayment calculator at gov.uk to see how the new threshold affects your monthly deduction from April 2026.
• If you're a higher earner on Plan 2 or 5, model the freeze years. A pay rise that outpaces the frozen threshold means more of your salary becomes repayable each year — factor this into budgeting for 2027–2030.
• Weigh up voluntary overpayments carefully. For most graduates, student loan interest and write-off rules mean overpaying isn't the priority it is for other debt — check MoneySavingExpert's student loan guide before making extra payments.
• If you're self-employed, remember loan repayments are collected via Self Assessment, not payroll — factor the correct rate into your tax return estimates.

International comparison

The UK's income-contingent system, where nothing is repaid below the threshold, differs from the US, where most federal student loans require fixed monthly payments regardless of income unless you opt into an income-driven plan via studentaid.gov. Australia's HECS-HELP system uses a similar income-contingent model to the UK's, with thresholds set by the Australian Taxation Office.

Key Numbers

• £29,385 new Plan 2 threshold from April 2026, then frozen to 2030
• £26,900 new Plan 1 threshold for 2026/27
• £25,000 Plan 5 threshold, repayments begin April 2026

Sources

• Student Loan Repayment Threshold 2026/27 — All Plans
• Student loan threshold in 2026: A guide for UK employers — PayFit

Educational content only — not financial advice.