Welsh Government freezes student loan repayment threshold for three years

Nation.Cymru staff

The Welsh Government has frozen the income threshold for student loan repayments at £29,385 a year for three years from April 2027.

The freeze applies to borrowers on Plan 2, which covers those who took out loans through Student Finance Wales for undergraduate or PGCE courses they began on or after 1 September 2012.

The threshold will stay at £29,385 until March 2030. As wages rise, some borrowers will start making repayments and others will repay more than they would have if the threshold had risen with inflation.

Cefin Campbell, the Deputy Minister for Skills and Tertiary Education, said the freeze followed the UK Government’s decision to hold the threshold at the same level for Plan 2 borrowers in England.

“This is not a decision I wanted to take,” Mr Campbell said in a written statement. “Unfortunately, the UK Government’s decision to freeze these thresholds for English Plan 2 borrowers leaves this Welsh Government with little choice.”

Welsh ministers set policy for Welsh borrowers, while the Student Loans Company and HM Revenue and Customs administer repayments through a shared UK-wide system.

Mr Campbell said: “Substantial system changes over several years would be required and cannot be implemented before 2027-28. A threshold freeze for Welsh Plan 2 borrowers is unavoidable.”

The lower and upper income thresholds used to determine the interest rate on Plan 2 loans will also stay at £29,385 and £52,885 respectively.

Mr Campbell said he had considered whether the Welsh Government could ease the impact on borrowers. “In the current fiscal climate, there is not,” he said.

He said Welsh borrowers on Plan 2 would still have a higher repayment threshold than English borrowers on Plan 5, with any remaining balance written off a decade sooner. He also pointed to Wales’ £1,020 universal base maintenance grant and a scheme that cancels up to £1,500 of borrowers’ loan debt.

The Welsh Government’s Review of Higher Education, led by Professor Patrick Prendergast, will consider future repayment arrangements. Mr Campbell said the freeze would give the review some extra financial flexibility.

“This underlines the importance of developing a stronger Made for Wales approach to student finance,” he said.

Student debt

The decision comes as Chancellor John Healey faces renewed pressure over student debt. His Budget left in place the three-year freeze announced by his predecessor, Rachel Reeves, last October.

At Treasury questions in the Commons on Tuesday, Labour MP Catherine West urged Mr Healey to look again at the issue when the public finances improve. He said the Government would “keep an eye” on it and would return to it.

Liberal Democrat MP Sarah Olney asked when the freeze would end. Treasury Minister Emma Reynolds pointed to a 6% cap on interest rates for Plan 2 and Plan 3 loans this year. She also said targeted maintenance grants for students from low-income households would return in England from the 2028–29 academic year.