The National Union of Students (NUS) has warned that a three-year freeze on the salary threshold for student loan repayments could leave new graduates struggling to cover essential living costs.
In Wednesday’s Budget, Chancellor Rachel Reeves announced that from April 2027 the repayment threshold for Plan 2 student loans will be frozen at £29,385.
Plan 2 applies to students who began courses in England and Wales between September 2012 and July 2023. The current threshold is £28,470.
Alex Stanley, NUS vice-president for higher education, said the freeze could push graduates into repayment while earning salaries dangerously close to the minimum wage.
He warned that many already face a difficult job market and high living costs in cities where graduate roles are often concentrated.
The national living wage (NLW) will rise from £12.21 to £12.71 per hour next year around £24,400 annually for full-time work. Future increases could bring low-paid graduates close to the repayment threshold. The Office for Budget Responsibility (OBR) forecasts that by 2030 a full-time minimum wage worker will earn about £28,995—just £400 below the frozen threshold.
Student finance comprises tuition fee loans and maintenance loans, both of which must be repaid. Repayments depend on the borrower’s loan plan, which is determined by when and where they studied. Once earnings exceed the threshold, 9% of income above that level is deducted.
Stanley said the freeze means graduates will begin repaying much sooner, arguing they should be given time to settle into work amid rising living costs and lagging wages.
He also noted the change disproportionately affects those who relied on loans to pursue higher education.
The Treasury defended the measure, saying graduates typically earn more and should repay a fairer share compared with non-graduates. It stressed that the freeze does not increase the total amount borrowed.
The government is also freezing the interest thresholds on Plan 2 loans, currently set between 3.2% and 6.2%.
The OBR estimates the threshold freeze will generate around £400m a year in the medium term, as more graduate income becomes subject to repayment and higher interest rates apply.
