Plan 2 Student Loan Threshold Freeze 2027 — What Changes

From 6 April 2027, the UK government plans to keep the Plan 2 student loan repayment threshold at £29,385 for three years. The freeze is scheduled to cover the 2027/28, 2028/29 and 2029/30 tax years. It does not change the Plan 2 repayment rate: under the current GOV.UK rules, a borrower repays 9% of income above the applicable threshold.

This is a threshold change, not a new tax and not a change to the balance written off. The practical effect is that a Plan 2 borrower whose pay rises above £29,385 can repay more than they would have done if the threshold had increased. The exact difference depends on earnings, pay frequency, other loan plans and the final payroll rules for each year.

Use the Salary Calculator→ to model current take-home pay with a student loan, then read the Student Loan Repayments 2026/27 guide for the wider plan rules.

What is the Plan 2 threshold freeze?

The government announced that the Plan 2 repayment threshold will be frozen at £29,385 for three years from April 2027. The threshold is the annual income level below which a Plan 2 borrower does not make a standard income-contingent repayment through the UK earnings calculation.

The policy does not mean that every student loan threshold is £29,385. Plan 1, Plan 4, Plan 5 and Postgraduate Loans have separate rules. It also does not mean that a borrower with a different plan can choose to use the Plan 2 threshold.

The freeze should therefore be read as a targeted change to the point at which Plan 2 repayment begins, rather than as a complete rewrite of the student-loan system.

How is a Plan 2 repayment calculated?

The basic annual illustration is:

(gross income − Plan 2 threshold) × 9%

The result is zero when gross income is at or below the threshold. For income above the threshold, only the excess is multiplied by 9%.

These are simplified annual illustrations, not guaranteed payslip values. PAYE normally applies the threshold by pay period, so a monthly employee is compared with a monthly threshold and a weekly employee with a weekly threshold. Bonuses, irregular pay, a change of employer, multiple loan types and Self Assessment can change the result.

Why can a frozen threshold increase repayments?

If the threshold stays at £29,385 while earnings rise, more of the borrower's income can fall above the threshold. The repayment rate does not need to change for the amount deducted to increase.

For example, if a borrower earns £35,000 in a year covered by the freeze, the simplified amount above the threshold is £5,615. At 9%, that produces an illustrative £505.35 annual repayment. If the threshold had instead risen, the amount above it would have been smaller. The difference between those scenarios cannot be calculated without an alternative threshold and the borrower's actual pay pattern.

This is why a threshold freeze can matter most to borrowers whose pay rises gradually through the band just above £29,385. It does not automatically mean that every borrower will pay more: someone below the threshold still has no standard Plan 2 repayment on that income, and someone with a different plan follows that plan's rules.

Does the freeze apply to other student loan plans?

No. The announcement is specifically about Plan 2. The following plans remain separate:

• Plan 1 has its own threshold and repayment announcement.
• Plan 4 applies to qualifying Scottish borrowers under its own rules.
• Plan 5 has a separate threshold for eligible newer borrowers.
• Postgraduate Loans use a separate repayment percentage and threshold.

If a borrower has more than one undergraduate plan, GOV.UK says the repayment is calculated using the lowest relevant threshold and the repayment is allocated between loans under the applicable rules. A Postgraduate Loan can be deducted separately at 6% above its own threshold. The Plan 2 freeze does not by itself tell an employer how to calculate every multiple-loan case.

Check the plan type shown in the borrower's Student Loans Company account and on the payroll record. Do not select Plan 2 simply because its threshold is higher or because the borrower studied in England; the plan is determined by the loan terms, course and circumstances.

What does it mean for employees?

Before the freeze begins, a borrower should separate four questions:

1. Which plan do I have? — the freeze only targets Plan 2.
2. What is my gross pay in each pay period? — deductions are not based on take-home pay.
3. Do I also have a Postgraduate Loan or another undergraduate plan? — more than one deduction rule may apply.
4. Is my income employed, self-employed or mixed? — payroll and Self Assessment use different collection routes.

A threshold freeze can also affect household planning because the repayment appears alongside Income Tax and National Insurance on a payslip. It is still not Income Tax: it is an income-contingent student-loan repayment. A lender may treat the actual deduction as a monthly commitment, but lender affordability policies are separate from the government repayment rule.

Do not stop or change pension contributions, salary sacrifice or voluntary repayments solely because of the freeze. Those decisions depend on the person's wider cash flow, loan terms, interest, emergency savings and other financial priorities.

What does it mean for employers and payroll?

Employers should use the official student-loan deduction tables and employer guidance for the relevant tax year. The freeze announcement is not a replacement for the payroll instructions that specify monthly and weekly thresholds, rounding, starter information, plan notices and correction handling.

For an employee who changes jobs, the employer should use the information supplied through the normal starter process and HMRC/SLC notices. An employer should not hard-code a three-year annual figure into payroll without checking the published tables for the relevant year.

Payroll teams should also keep Plan 2 separate from:

• Plan 1, Plan 4 and Plan 5 deductions;
• Postgraduate Loan deductions;
• Income Tax and National Insurance; and
• voluntary repayments made directly by the borrower.

The freeze can change the amount deducted, but it does not turn student-loan repayments into PAYE tax or change the employer's role into a lender calculation.

What about overseas borrowers and self-employed income?

The £29,385 figure in this guide is the announced UK Plan 2 threshold for the freeze. Borrowers living overseas use country-specific Student Loans Company thresholds and repayment arrangements. They should not automatically apply the UK payroll threshold to overseas earnings.

Self-employed borrowers can have repayments calculated through Self Assessment, depending on their plan and income. The annual result can differ from a simple monthly PAYE illustration, especially where employment and self-employed income are combined. Check the current HMRC and Student Loans Company instructions for the relevant tax year.

What remains unknown or separate?

The threshold freeze does not answer every future student-loan question. Before 2027/28, recheck:

• the official deduction tables for each pay frequency;
• the confirmed thresholds for Plan 1, Plan 4, Plan 5 and Postgraduate Loans;
• the applicable interest-rate announcements;
• overseas thresholds and fixed repayment amounts;
• how any later legislation or payroll guidance implements the policy; and
• the borrower's current loan plan and balance in their SLC account.

The government can publish further details without changing the basic distinction: the announced measure freezes the Plan 2 repayment threshold, while rates, interest and write-off terms are separate policy components.

Frequently Asked Questions

Evidence and decision checks

A reliable student loan plan 2 threshold freeze 2027 review starts by fixing the tax year and the date on which the relevant event happened. Record the person's or business's status, the income or transaction category, the amount before tax, tax already withheld, and any election or claim being relied on. Do not combine a headline figure with a final liability: the result can change when another income source, a payment date, an ownership interest or a qualifying condition is added.

Keep the source documents behind every important input. Depending on the subject, that may include payslips, invoices, bank statements, contracts, provider statements, travel records, HMRC notices, payroll submissions, valuations or correspondence. Where an amount is apportioned, write down the method and retain the underlying total. If a correction is made, preserve the original figure and explain the reason, date and evidence for the replacement.

Before relying on the result, check the current official guidance for the same tax year and jurisdiction. Distinguish enacted law from a consultation, draft measure, announcement or future proposal, and record the effective date. Reconcile the final estimate to the relevant return, payroll record or HMRC account. A calculator or explanatory guide can support a decision, but it cannot replace the eligibility test or the official filing and payment process.

Use the Salary Calculator→ to model a current Plan 2 deduction, then compare it with the Student Loan Repayments 2026/27 guide and the broader UK Tax Changes 2027/28 guide. Recheck HM Treasury's Budget 2025 student-loan measure and the official payroll guidance before relying on the rule for 2027/28.

Official sources

• HM Treasury: Budget 2025
• HM Treasury: Budget 2025 policy costings
• GOV.UK: how much you repay
• Student Loans Company: Plan 2 and Plan 3 announcement
• HMRC: student-loan deduction guidance for employers

These HM Treasury, GOV.UK, Student Loans Company and HMRC sources are the official references for the planned £29,385 threshold freeze, the 9% Plan 2 repayment rule and payroll treatment discussed here.