Need to know
Money expert Martin Lewis is clashing with Chancellor Rachel Reeves, amid her decision to freeze the salary threshold for Plan 2 student loan repayments – which Lewis claims is “not moral”
- In November, Chancellor Rachel Reeves has announced a three-year freeze on the salary threshold for Plan 2 student loan repayments. Starting in April 2027, the repayment trigger will be held at £29,385 instead of rising with inflation.
- This specific change targets individuals in England and Wales who began their university courses between September 2012 and July 2023. These borrowers are currently repaying their loans once their income exceeds the present threshold of £28,470.
- By freezing the threshold, the government is effectively ensuring that graduates pay back more of their earnings as wages rise. This “fiscal drag” means workers will lose a larger portion of their take-home pay than they would if the limit had increased.
- Reeves defended the move as a “fair and proportionate” measure necessary to stabilise the national economy. She argued that the policy strikes a vital balance between necessary tax revenue and public spending requirements.
- The Chancellor stated that the primary goal of the freeze is to bring various student loan repayment plans into alignment with one another. She believes that having graduates start repayments at the same income level across different plans is a “fair and reasonable” approach.
- Personal finance expert Martin Lewis has voiced strong opposition, describing the decision to freeze the threshold as “not a moral thing” to do. He argues that the government is unfairly changing the terms of a contract that young people have already signed.
- Lewis emphasized that student loans are legally structured as contracts rather than a standard tax, despite the government treating them as the latter. He expressed concern that this move treats debt as a flexible levy that can be adjusted at the government’s whim.
- The Money Saving Expert founder has publicly urged the Chancellor to rethink the policy before it takes effect. He highlighted that many students entered these agreements without sufficient financial education regarding how thresholds could be manipulated in the future.
At Reach and across our entities we and our partners use information collected through cookies and other identifiers from your device to improve experience on our site, analyse how it is used and to show personalised advertising. You can opt out of the sale or sharing of your data, at any time clicking the “Do Not Sell or Share my Data” button at the bottom of the webpage. Please note that your preferences are browser specific. Use of our website and any of our services represents your acceptance of the use of cookies and consent to the practices described in our Privacy Notice and Terms and Conditions.
