A decade after the first students began repaying Plan 2 student loans, many graduates are finding their debt balances are increasing despite making regular monthly payments. This comes as the loans, introduced in 2012 when tuition fees in England and Wales rose to £9,000 a year, face scrutiny.
Charlotte, a physiotherapist earning about £50,000, reported that since April this year, she has paid approximately £450 but accrued over £500 in interest, leading to her loan balance growing. Research from the Institute for Fiscal Studies in February suggests Plan 2 graduates typically need to earn £63,000 or more for a £50,000 loan balance to begin decreasing.
Lizzy, who earns £85,000 annually, decided last year to clear her student debt by borrowing from her family. She estimated this would save her around £20,000 compared to her projected repayment over 11 years. Finance journalist Holly Mead noted that significant overpayments could be beneficial for those confident they will clear their debt, but smaller voluntary payments might only lead to paying more interest unnecessarily.
The government announced updated terms in November, including a three-year freeze on the income threshold for repayments, meaning graduates will start paying sooner and more each month. Last month, the government stated that university applicants in England would receive clearer information about student loans.