Graduates on Plan 2 student loans are unlikely to ever repay their debts in full if they earn less than £45,000 six years after leaving their course, according to official data. New analysis shows only 32% of 2022 Plan 2 graduates are likely to pay off their loans in full, and a salary between £45,000 and £50,000 is needed to have a 50% chance of full repayment.
Who is affected by Plan 2 loans
Plan 2 student loans apply to undergraduate courses started between September 1, 2012 and July 31, 2023 in England, or after September 1, 2012 in Wales. Graduates begin repaying 9% of their income once they earn over £29,385 a year, although interest accrues from the day the first payment is made to the university.
Interest is currently capped at a maximum of 6% following widespread anger over graduates facing ballooning debts. High interest rates and frozen repayment thresholds have caused total debt balances to grow for many graduates, despite regular monthly payments.
Repayment statistics and loan comparisons
The average graduate with a Plan 2 loan has an outstanding balance of £52,100. Plan 2 loans are wiped after 30 years. In contrast, around 55% of students on newer Plan 5 loans in 2025 are likely to pay off in full. Plan 5 loans are wiped after 40 years but carry a lower interest rate, set at RPI from the previous March, currently 4.1%.
The data follows a cross-party group of MPs calling for the salary threshold freeze for Plan 2 loan repayments to be scrapped. At the October budget, then-Chancellor Rachel Reeves froze the salary threshold for three years from 2027. The threshold was meant to be uprated with inflation each year when created in 2010, but it has been frozen on several occasions since 2016.
Government response to loan concerns
While the committee welcomed the interest cap as a “step in the right direction,” it said this would only benefit the highest earning graduates who will pay back their loan in full. A government spokesperson said: “We've taken decisive action to protect students, including capping maximum interest rates and reintroducing maintenance grants, and we continue to look at further ways to make the system we inherited fairer for everyone.
“Borrowers should also be reassured that their total balance does not affect their monthly repayments, and any outstanding debt is written off at the end of the term.”
