Student loans labelled 'mis-selling' — what the threshold freeze really costs you every month

A parliamentary committee has accused the government of "mis-selling" student loans to an entire generation of graduates, after it emerged that the repayment threshold — the salary at which you start repaying 9% of your earnings — has been frozen at £29,385 until 2030, despite the Chancellor committing to the contrary when the Plan 2 loan system was designed.

The Guardian and The Independent both published the story in July 2026. For millions of graduates, the practical impact is significant and very real — appearing as a larger monthly deduction on their payslip than they were originally told to expect.

How student loan repayments work

Under Plan 2 student loans (taken by English and Welsh students who started university from September 2012 onwards), you repay 9% of everything you earn above the repayment threshold. You pay nothing below the threshold.

When the Plan 2 system was sold to students, the threshold was promised to rise with average earnings each year. That would have meant the threshold reaching approximately £33,000–£35,000 by now. Instead, it has been frozen at £29,385 for three years (2027–2030).

What the freeze actually costs you

The freeze means graduates start repaying earlier and repay more each month than they would have if the threshold had risen with earnings. Here is a real comparison at different salary levels:

• Salary £35,000: Monthly repayment = £42/month. Without the freeze (threshold ~£33,500), it would be £11/month. Extra cost: £31/month (£372/year)
• Salary £40,000: Monthly repayment = £79/month. Without freeze: £49/month. Extra: £30/month (£360/year)
• Salary £50,000: Monthly repayment = £154/month. Without freeze: £124/month. Extra: £30/month (£360/year)

Plan 2 vs Plan 5 — which are you on?

Students who started university in England from September 2023 onwards are on the newer Plan 5 system. Plan 5 has a lower threshold (£25,000) but a longer write-off period (40 years vs 30 years for Plan 2). If you are confused about which plan you are on, check your payslip — it will show either "Plan 2" or "Plan 5" (or "SL2" / "SL5") as a deduction label. Use our Plan 5 student loan calculator for the newer system.

The 'mis-selling' argument

The MPs' argument centres on the fact that the original Plan 2 system was presented to 2012–2023 cohorts with the assurance that the threshold would rise annually in line with average earnings. This was explicitly stated in government communications and student finance literature at the time.

The freeze breaks that implied promise. Graduates who made course and career decisions partly based on understanding how much they would repay are now finding their repayments significantly higher than projected. The IFS estimated the freeze means the average graduate repays thousands more over their loan lifetime.

Should you overpay your student loan to avoid the freeze?

This is the question many graduates are asking, and the answer is almost always no. Here is why: for most graduates, the student loan will be written off before it is fully repaid anyway (after 30 years on Plan 2). Paying extra now costs real cash with no corresponding benefit if the loan gets written off regardless.

The only situations where overpaying might make sense are:

• You are very close to paying off the balance (within 2–3 years of clearing the debt)
• You are a high earner who will definitely clear the debt within the repayment period
• The interest rate on your loan is higher than a savings rate you could get elsewhere

For most people, the Plan 2 interest rate (currently capped at 6%) is lower than or comparable to what you could earn on savings, making voluntary overpayment poor financial planning.

How to check what's being taken from your payslip

Your student loan repayment should appear as a separate line on your payslip, labelled "Student Loan" or "SL2/SL5." If it does not appear and you earn above the threshold, contact your employer's payroll department — they may need your plan type to set up the deduction correctly.

You can also check your total loan balance and monthly statement on the Student Loans Company website at studentloansrepayment.co.uk. Use our student loan calculator to cross-check that your employer is deducting the right amount.

Frequently Asked Questions

I graduated in 2018 and earn £28,000 — do I pay anything?

No. The current Plan 2 repayment threshold is £29,385. You earn below this, so nothing is deducted from your pay. You only start repaying once your income exceeds £29,385.

Does the threshold freeze affect me if I am on Plan 1?

Plan 1 (for students who took loans before September 2012) has a different threshold that rises annually with the Retail Price Index, not earnings. For 2026/27, the Plan 1 threshold rose to £26,900. The freeze controversy specifically relates to Plan 2 and Plan 5 loans.

Will the threshold unfreeze in 2030?

Based on current government commitments, the Plan 2 threshold will resume rising with average earnings from 2030. However, this is subject to future government decisions — the same promise was made (and then broken) once already.

I have both a student loan and a postgraduate loan — are both deducted?

Yes. If you have both an undergraduate loan (Plan 2) and a postgraduate loan (Plan 3), both deductions appear on your payslip. Postgraduate loan repayments are 6% of earnings above £21,000 — calculated separately and on top of your undergraduate repayments. Use our calculator to see both deductions combined.

Can I check if I have been deducted the correct amount?

Yes. Check your payslip deduction amount against our student loan calculator using your gross monthly pay. If the figures do not match, raise it with your payroll team — employer errors in student loan deductions are more common than you might expect.