Written Statement: Plan 2 student loan repayment thresholds

I am today confirming that the income threshold at which those with Plan 2 student loans begin repayment will remain at £29,385 for the three financial years from 2027-28 to 2029-30. The associated lower and upper interest-rate thresholds will also be unchanged at £29,385 and £52,885 respectively. 

This is not a decision I wanted to take. Unfortunately, the UK Government’s decision to freeze these thresholds for English Plan 2 borrowers leaves this Welsh Government with little choice. Student loan repayments are administered by the Student Loans Company and HM Revenue and Customs through a shared UK-wide system. While the Welsh Ministers determine policy for Welsh borrowers, the current system cannot support different repayment thresholds for Welsh and English borrowers. 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.

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. 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. 

Student finance issues will be considered through the Review of Higher Education and maintaining system stability is the right choice at this time. In reaching this decision, I considered carefully whether there was a way in which the Welsh Government could mitigate the impact of the freeze on Welsh borrowers. In the current fiscal climate, there is not. 

The Welsh Government faces 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. This underlines the importance of developing a stronger Made for Wales approach to student finance. The Review, led by Professor Patrick Prendergast, is underway, and will enable this Government to create a future student finance system which better reflects the needs of Welsh universities, learners and borrowers than the one we inherited.