Summary
Chancellor Rachel Reeves called the current student loan system "fair and reasonable" following criticism for freezing the repayment threshold at which graduates start repaying their loans. The freeze means graduates on Plan 2 loans in England and Wales will have to repay loans starting at an income of £29,385 from April 2027, for three years. Critics argue this decision treats student loans like a tax and burdens graduates with rising repayment costs due to inflation.
Key Facts
- The repayment threshold for Plan 2 student loans will be frozen at £29,385 from April 2027 for three years.
- This change will affect graduates in England and Wales who started courses between 2012 and 2023.
- Plan 2 loans were introduced when tuition fees increased to up to £9,000 a year.
- Graduates repay 9% of earnings above their threshold, with automatic payments through the tax system.
- The interest rate for Plan 2 loans includes RPI inflation plus up to 3% based on earnings.
- Higher inflation recently increased interest rates on these loans, making repayments more costly over time.
- Critics, including finance expert Martin Lewis, challenged the fairness of treating loans akin to taxes.
