Government announces plans to increase Plan 2 and postgraduate student loan repayments by £110 a year from April

This will likely mean some pay as much as £3,000+ more over the 30 years before their loan is wiped. Former postgraduate students from England and Wales who took a loan to fund their study will also be impacted. We've full details below, plus MoneySavingExpert.com founder Martin Lewis's instant video reaction to the changes where he explains what's been announced, and how it impacts those who've left university and have loans to repay.

University leavers impacted by the shake-up are those on 'Plan 2' loans and those with a postgraduate loan

Repayment thresholds for Plan 2 loans had been due to rise this April by 4.6% based on average earnings growth, if the Government had followed practice from previous years. Its plan to freeze the repayment thresholds will mean: 

• The repayment threshold for 'Plan 2' loans will remain at £27,295/yr from April, which means many university leavers will pay £110/yr more. This is instead of a repayment threshold of £28,550, which is what it would have gone to from April if it had been raised in line with average earnings. This change impacts all university leavers from England and Wales who STARTED university in/after 2012 and who took out a loan.

• The repayment threshold for postgraduate ('Plan 3') loans will remain at £21,000/yr from April, which means many former postgraduate students will repay £87/yr more. This is instead of a repayment threshold of £21,960, which is what it would have gone to from April if it had been raised in line with average earnings (though it has been frozen at £21,000 since loans of this type were introduced). This change impacts all English and Welsh (and EU) postgraduate students who took out a master's loan on/or after 1 August 2016 or a postdoctoral loan on/or after 1 August 2018.

The freeze, if implemented, represents a break with the previous policy made by the Government in 2010 and then reiterated in 2017 by former Prime Minister, Theresa May, that the repayment threshold would be uprated annually "in line with the annual average earnings growth".

MoneySavingExpert.com founder Martin Lewis, who has consistently warned against retrospective changes to student loans, explains this in his tweets below:

The repayment threshold hasn't, however, been cut - something that had previously been reported as a possibility. 

Student loan repayment thresholds had already been confirmed for other university leavers

The following repayment thresholds will rise for other types of student loans. These threshold rises were announced last year and have since been reconfirmed: 

• Plan 1 loans: The repayment threshold will increase from £19,895/yr to £20,195/yr from 6 April 2022. This impacts all English and Welsh undergrad loans for those who STARTED university between 1998 and 2011. PLUS all Northern Irish undergraduate loans since 1998.

• Plan 4 loans: The repayment threshold will increase from £25,000/yr to £25,375/yr from 6 April 2022. This impacts all Scottish undergraduate loans for those who STARTED university in/after 1998.

• Pre-1998 undergraduate loans: The deferment threshold – the annual salary below which you can opt not to repay your loan, which is used on these loans instead of a repayment threshold – will rise from £30,646/yr to £36,284/yr from 1 September.

For more details of how these loans work, see our Repaying your Student Loan guide. 

What does the Government say?

In a written statement published today, Michelle Donelan, minister of state for higher and further education  said: "Maintaining the repayment threshold at its current level, alongside the ongoing freeze in fees, will help to ensure the sustainability of the student loan system, while keeping higher education open to everyone who has the ability and the ambition to benefit from it, including the most disadvantaged."

A Department for Education spokesperson added: "It is now more crucial than ever that higher education is underpinned by a sustainable finance and funding system."

Ms Donelan also said the Government will shortly set out further plans for addressing the student finance recommendations made in the so-called 'Augar' review.