Student loan borrowers in England and Wales have been given their repayment thresholds for the 2027–28 tax year, with the point at which most newer English undergraduates begin paying set to rise.
From 6 April 2027, the Plan 5 threshold will increase from £25,000 to £26,025 a year. The Plan 2 threshold will remain at £29,385, while the postgraduate Plan 3 threshold will stay at £21,000.
The figures apply until 5 April 2028. The Department for Education and the Welsh Government confirmed the thresholds on 12 November. Plan 5 covers eligible borrowers who took out loans through the English system; the Plan 2 and postgraduate figures apply to relevant borrowers through the English and Welsh systems.
The announcement brings together different decisions. The Plan 5 figure had already appeared in forecasts. The freeze for English Plan 2 borrowers was announced in the 2025 Budget, while Wales has recently confirmed that it will also keep its Plan 2 threshold at £29,385 for three tax years.
What the thresholds mean
A repayment threshold is the level of income above which a borrower who is due to repay begins making income-linked payments. It is not the amount of the loan, nor is the repayment percentage applied to the whole salary.
For Plans 2 and 5, the repayment rate is 9% of income above the relevant threshold. For a postgraduate loan, it is 6% above the postgraduate threshold. The calculation is based on income before tax and other deductions.
The £1,025 rise in the Plan 5 threshold is equivalent to 4.1% of its previous level. It changes the income at which repayments begin, not the percentage paid on income above that point.
For an illustration, take a borrower with a Plan 5 loan who is already due to repay and earns £30,000 before tax in each year. Using the annual thresholds and a 9% rate, the unrounded calculation would be £450 against the £25,000 threshold and £357.75 against the £26,025 threshold. That is a difference of £92.25 over a year, assuming income and the other circumstances remain unchanged.
Those figures are not a promise about a particular payslip. Employees’ deductions use weekly or monthly pay-period thresholds, with payroll rounding. Bonuses, changing pay, having more than one loan or approaching the end of a balance can affect what is collected.
Which borrowers are affected?
The plan depends on the student finance arrangement, the course and when it began, rather than simply the borrower’s current address. Eligible undergraduate borrowers who applied through Student Finance England and started courses from 1 August 2023 are generally on Plan 5. English undergraduate courses started from 1 September 2012 to 31 July 2023 are generally on Plan 2.
For borrowers who applied through Student Finance Wales, undergraduate courses started from 1 September 2012 generally fall under Plan 2. Postgraduate master’s and doctoral loans in England and Wales are on the postgraduate plan. Other courses and older loans have different rules, so the named plans do not cover every student borrower.
Some people have both an undergraduate loan and a postgraduate loan. They can be required to make a 9% repayment above their applicable undergraduate threshold and a separate 6% repayment above the postgraduate threshold.
Why the Welsh threshold is frozen
Wales’s Plan 2 threshold will remain at £29,385 for 2027–28, 2028–29 and 2029–30. An earlier Welsh Government had said it did not intend to follow England’s freeze.
Deputy Minister for Skills and Tertiary Education Cefin Campbell said the shared repayment system could not currently support different Plan 2 thresholds for English and Welsh borrowers without substantial changes over several years. He said the Welsh Government regarded a freeze as unavoidable and that the decision would provide some additional financial flexibility for its higher education review.
NUS Cymru criticised the decision, saying students had agreed to loans on the expectation that thresholds would rise. A frozen threshold does not increase the 9% rate, but if a borrower’s earnings rise, a larger amount of their income can fall above it than would have done with a rising threshold.
Repayments and interest are different
The announcement also keeps the Plan 2 lower interest-rate threshold at £29,385 and the higher interest-rate threshold at £52,885. These income levels help determine the interest rate applied to a Plan 2 balance after study; they are not additional repayment charges.
Interest can continue to be added even when someone earns below their repayment threshold. The interest rate affects the balance, whereas the income-linked repayment calculation depends on earnings and the relevant plan. The November notice confirms thresholds; it does not set a new interest rate for the whole of 2027–28.
Loan terms differ in other ways too. A Plan 2 balance is normally written off 30 years after the April when the borrower first became due to repay. For Plan 5, the corresponding period is 40 years. A borrower can check their plan in their student loan account if they are unsure which rules apply.
