Guide · Updated July 2026
How the Plan 2 Threshold Freeze Affects Your Repayments
When salaries grow but the income threshold for student loan repayments stays fixed, you gradually repay more each year than you would if the threshold had kept pace with inflation. The UK government has frozen the Plan 2 threshold twice. This guide explains the mechanism, shows the numbers, and lets you model both scenarios.
What the repayment threshold is
The repayment threshold is the income level below which no student loan repayments are due. On Plan 2, you repay 9% of everything you earn above this threshold. If you earn below it, you pay nothing that year and the pause does not count against your write-off clock.
Crucially, it is the gap between your salary and the threshold that determines your annual repayment, not just your salary in isolation. A rising salary with a frozen threshold increases your repayment faster than a rising salary with a rising threshold.
Annual repayment = 9% × (salary − threshold)
At £38,000 salary with threshold £29,385:
= 9% × (£38,000 − £29,385) = 9% × £8,615 = £775/year
Same salary if threshold were £33,000 (roughly £29,385 + 5 years at 2.5% RPI):
= 9% × (£38,000 − £33,000) = 9% × £5,000 = £450/year
The history of Plan 2 threshold changes
From 2012 to 2020, the Plan 2 threshold was uprated each April in line with average earnings. From 2021, the government shifted to a policy of freezes.
| Tax year | Threshold |
|---|---|
| 2020–21 | £26,575 |
| 2021–22 | £27,295 |
| 2022–23 | £27,295 |
| 2023–24 | £27,295 |
| 2024–25 | £27,295 |
| 2025–26 | £29,385 |
| 2026–27 | £29,385 |
| 2027–28 | £29,385 |
| 2028–29 | £29,385 |
| 2029–30 | £29,385 |
If the threshold had tracked 3% annual RPI from April 2021, it would be approximately £32,200 by April 2026 rather than £29,385. The threshold is currently around £2,800 lower than it would have been under continuous uprating.
Why a frozen threshold costs you more each year
The mechanism is straightforward. When your salary grows with inflation and career progression, but the threshold stays put, the gap between your salary and the threshold widens every year. A wider gap means a larger 9% repayment.
This is sometimes called “fiscal drag” or “bracket creep” by analogy with income tax: the same mechanism that pulls more people into higher tax bands when bands are frozen also pulls more of a graduate’s salary into student loan repayments when the threshold is frozen.
Illustrative example (not a forecast)
Graduate earning £35,000 in 2026, salary growing at 4% per year (roughly 1.5% real plus 2.5% inflation). Threshold: frozen at £29,385 vs growing at 2.5% RPI.
| Year | Salary | Frozen (£29,385) | Uprating | Extra cost |
|---|---|---|---|---|
| 2026 | £35,000 | £506 | £506 | £0 |
| 2027 | £36,400 | £632 | £562 | £70 |
| 2028 | £37,856 | £762 | £620 | £142 |
| 2029 | £39,370 | £899 | £681 | £218 |
| 2030 | £40,945 | £1,040 | £744 | £296 |
| Total extra over 5 years | £726 | |||
For illustration only. Uses simplified constant growth rates. The calculator uses bond market inflation forecasts and industry salary data for your specific situation.
The extra cost accelerates over time because the gap between salary and the frozen threshold widens each year. By the fifth year the annual additional cost is more than four times the first-year cost.
Who is most affected
The impact of the freeze is larger for:
- 1.Graduates projected to repay in full before write-off. If you are going to repay everything regardless, a frozen threshold means you repay faster and pay more in total nominal terms. Each extra pound you pay earlier under the frozen threshold is a pound that saves no further interest if you were already going to repay the full balance.
- 2.High-growth salary careers. Technology, finance, law and other sectors with strong real wage growth see the largest widening of the salary-to-threshold gap. A frozen threshold costs a software engineer who hits £60,000 by year five considerably more than someone whose salary grows slowly.
- 3.Borrowers early in their careers. The freeze compounds over time. Someone who graduates in 2026 and faces a frozen threshold until 2030 will have four consecutive years of widening gap before any uprating potentially resumes.
For borrowers projected to reach write-off with a remaining balance regardless, the picture is different. Extra repayments accelerated by the freeze reduce the balance, but if the loan gets written off either way, those extra repayments are not recovered. The freeze can actually hurt write-off borrowers more than it appears: they pay extra money but derive no long-term benefit from the higher repayments.
What the 2021-2025 freeze cost borrowers
The first freeze held the threshold at £27,295 for four consecutive years. Over that period, UK RPI averaged approximately 5-6% per year (peaking at over 10% in late 2022). If the threshold had tracked RPI over those four years, it would have reached approximately £32,000-£33,000 by April 2025 rather than remaining at £27,295.
For a graduate earning £40,000 in 2024-25, the difference between a £27,295 and a £32,500 threshold is:
Actual repayment (frozen at £27,295): 9% × (£40,000 − £27,295) = £1,143/year
Counterfactual (threshold at £32,500): 9% × (£40,000 − £32,500) = £675/year
Difference: £468 per year (41% more)
Compounded across four years of growing salary and widening gap, many mid-career Plan 2 graduates paid several thousand pounds more in repayments during 2021-2025 than they would have under pre-freeze uprating policy.
How to model both scenarios in our calculator
Our calculator includes a threshold assumption toggle that lets you switch between:
- FrozenThe threshold stays at £29,385 for the full projection. This reflects current government policy through April 2030, extended as a permanent freeze thereafter. This is the more cautious (and currently correct) assumption.
- Inflation-linkedThe threshold grows with the bond market RPI forecast each year from today. This models what you would repay if the government restored annual uprating. Repayments will be lower under this assumption, particularly in later years.
The difference between the two scenarios is your projected cost of the threshold freeze. For most Plan 2 graduates on a typical career path, this is thousands of pounds in total nominal repayments.
See the freeze impact for your situation
Enter your balance and salary, then use the threshold toggle to compare frozen vs inflation-linked outcomes side by side.
Calculate my loan →What happens after April 2030
The government’s stated policy freezes the Plan 2 threshold at £29,385 until April 2030. What happens after that is not confirmed.
Possible outcomes include:
- ?Resumption of annual uprating in line with earnings or RPI (pre-2021 policy)
- ?A further freeze at £29,385 beyond 2030
- ?A one-off increase to partially compensate for frozen years, followed by uprating
- ?Changes to the repayment rate or upper income threshold alongside any threshold change
Our calculator defaults to the “frozen” assumption, which is conservative and reflects current confirmed policy. The “inflation-linked” toggle gives you the upper bound: what you would repay if uprating were permanently restored from today. Reality will likely fall somewhere in between.