Welsh students to start repaying loans earlier after thresholds frozen

The income level at which Welsh graduates start repaying loans is to be frozen, the Welsh government has announced.

In a move which has already proved controversial in England, the threshold for Plan 2 loans will be frozen at £29,385 between 2027 and 2030, rather than rising with inflation.

It means graduates will start repaying their loans sooner than they would otherwise have done as they are likely to meet the salary threshold earlier.

NUS Cymru president Jennifer Taylor has criticised the move. "Let's be clear, a bank could not get away with this," she said.

But Cefin Campbell, deputy minister for skills and tertiary education, said the Welsh government had been left with "little choice".

Campbell also said the government was "considering" raising the cap on university tuition fees, currently £9,790 a year, and an announcement would be made "in the next couple of weeks".

The Welsh government is yet to confirm its approach after the UK government announced last year that fees in English universities would go up to a maximum of £10,050 from September 2027.

Earlier this year, the previous Welsh Labour government said it would not freeze the loan repayment threshold in Wales, after former Chancellor Rachel Reeves announced the decision to do so for English Plan 2 borrowers in her November 2025 budget.

The UK government decision was heavily criticised by some MPs and financial expert Martin Lewis, who said it was unfair to change the terms of the loans once they had been taken out.

But, announcing the decision on Wednesday, Campbell said the system - which is administered by the Student Loans Company and HM Revenue and Customs through a shared UK-wide system - "cannot support different repayment thresholds for Welsh and English borrowers".

Most Welsh undergraduates take out Plan 2 loans, which have interest rates in line with the retail prices index (RPI) measure of inflation, plus up to 3% depending on earnings.

Graduates repay 9% of the amount earned above the threshold outlined in their plan.

They do not have to start making payments until April after leaving their course, and only when they earn above the income threshold; payments are made automatically through the tax system.

"This is not a decision I wanted to take," said Campbell.

"I recognise the impact that this decision will have, and I know that Welsh borrowers will be disappointed.

"Welsh Plan 2 borrowers will still benefit from a higher repayment threshold than English borrowers on Plan 5, and any remaining loan will be written off a decade sooner," he said.

"Our maintenance grants, including the £1,020 universal base grant, mean Welsh borrowers have less debt than their English counterparts on average, and we cancel up to £1,500 of borrowers' loan debt."

Since 2023, English undergraduates have taken out Plan 5 loans which have different terms to Plan 2.

They are cancelled after 40 years if the loan has not been repaid, unlike Plan 2 loans which are cancelled earlier, after 30 years.

Responding to the government announcement, NUS president Taylor said: "We signed a contract, based on repayment thresholds rising each year.

"Successive governments are playing politics with our mortgage-size debts - let's be clear, a bank could not get away with this.

"For young people in Wales, this announcement will mean hundreds less in their bank accounts each year. It could be the difference between saving for a house, or just the smaller buffer from debt disappearing.

"Our call is to the Chancellor John Healey – stop freezing our futures and respect the terms of our student loans that we signed as young as 17."

An independent panel, set up by the Plaid Cymru government, has begun work on a review of higher education which will look at the student support system and the sustainability of Welsh universities.

Campbell said the Welsh government faced "a challenging financial position in respect of the student loan system".

"A freeze, while unavoidable, will mean that the review has some additional financial flexibility when considering future student loan repayment arrangements," he said.

"This underlines the importance of developing a stronger Made for Wales approach to student finance".

Taylor said NUS Cymru was "keen to work with the Welsh government" as part of the funding review "to develop a system that has students in Wales at the heart".