The Chancellor aims to raise £400m a year by freezing one thing
Freezing the threshold will mean people pay back more in total, Martin Lewis says (Image: ITV)
Money saving expert Martin Lewis has warned that Brits who are paying back their student loans will “pay more in total” after Rachel Reeves’ tax raids in her Autumn Budget. Currently, graduates on Plan 2 student loans – those who attended university between 2012 and 2023 and paid £9,000 or more for tuition each year – repay 9% of everything they earn over £28,470. From next April, that will go up to £29,385, which will be frozen for the next three years.
The Chancellor predicts that the announcement, instead of falling alongside interest rates and inflation, will raise £400m a year for the Treasury. Freezing the threshold instead of raising it each year as wages go up means that each year, more people will begin repaying as salaries increase.
From next April, the threshold that graduates starts to repay the loan will go up to £29,385 (Image: Getty)
On his programme, The Martin Lewis Money Show, the expert spoke to Ms Reeves to find out why Labour is going after graduates.
He explained: “So your income will go up, but that rate is frozen, so you will pay more each year on student loans. As most people on Plan 2 don’t pay it off within the 30 years before it wipes, that means you’ll pay more on your student loan in total.”
The money saving expert asked the Chancellor why she is implementing the changes.
She responded: “So, we have frozen it in the same way that thresholds have been frozen for three years. It was important at the Budget that we asked everyone to pay a little bit more.
“It’s the case that something like 34% of Plan 2 student loans are not paid back at all, and we need a sustainable system of student finance.”
In response to the news, Alex Gallagher, chief strategy officer at Unidays, said the change will add increased “financial pressure” to students
He told This is Money: “The Autumn Budget is bittersweet for our student members; whilst we welcome the rise in hourly minimum wage for over 300,000 student workers across the UK, the student loan repayment threshold freeze will drive up repayments for current and future graduates, and further add to the financial pressures they face at university.”
