Approximately nine out of ten graduates with Plan 2 student loans have seen their outstanding debt increase despite making repayments, according to data from the Student Loans Company. As of May 2026, around 4.4 million borrowers who began repaying these loans are in greater debt than when they started, highlighting ongoing concerns about the structure and cost of student borrowing in the UK.

Plan 2 loans apply to students who started university between September 2012 and July 2023. Borrowers under this scheme begin repayments the April after they graduate, paying 9% of income above the current threshold of £29,385. However, interest accumulates from the moment studies commence, charged at the retail prices index (RPI) inflation measure plus up to 3 percentage points depending on earnings. At present, the RPI stands at 3.2%, but following public criticism, the government has announced a cap on interest rates at 6% for the 2026-27 academic year.

The high interest rates mean that for many graduates, their repayments do not cover the accumulating interest, causing debts to grow over time rather than shrink. The average borrower on Plan 2 must earn approximately £66,000 annually before repayments begin to reduce the principal balance. The Student Loans Company has stated that only 6% of borrowers are currently reducing their original debt, with the remaining 94% effectively falling further into debt despite regular payments.

Critics argue that this system presents significant challenges to graduates trying to manage their finances. Oliver Gardner, founder of the Rethink Repayment campaign, described the situation as "a sad indictment of how broken the student loan system is," emphasizing that many graduates find themselves trapped in a cycle of increasing debt despite making payments.

There are five different student loan plans in the UK, governed by varying terms based on when a student enrolled, their residency, and level of study, all administered by the Student Loans Company. Across all these loan types, an estimated 83% of borrowers have seen their debts grow since repayments began, a rise from 76% reported earlier this year.

The ongoing debate over student debt has prompted parliamentary scrutiny. In April 2026, the Treasury select committee launched an inquiry into student loans and graduate taxation, receiving over 52,000 responses in just one month. Many respondents criticized the interest rates as excessive and the repayment terms as unreasonable, with 93% opposing current loan conditions.

Although the repayment threshold was increased in April 2026—the first rise since 2021—it remains frozen at £29,385 until 2030. This effectively means graduates will start repaying at a lower relative income level than initially intended when the Plan 2 scheme was introduced, as the threshold was originally set to increase with average earnings.

The Department for Education defended recent measures, highlighting efforts to make the system fairer, including the interest cap and higher repayment threshold. The department also noted the reintroduction of targeted maintenance grants aimed at supporting students from diverse backgrounds. It emphasized that repayment amounts are income-linked and that any remaining balance and accrued interest are written off at the end of the repayment term, offering some protection for lower earners.