New students face £56,240 lifetime loan bill
This week's A-level cohort signs up to Plan 5, Britain's harshest student loan terms, as the state's share of graduate costs falls to 8%.
Hundreds of thousands of teenagers open their A-level results on Thursday knowing they are about to sign up to the harshest student loan repayment terms in British history.
“I feel entirely trapped about the reality of a loan decision I had to make to access education at a young age,” one graduate told the Treasury Select Committee earlier this year. That decision is made at 17 or 18, before a single pound is earned, and it now binds a generation to repayment terms nobody voted for and few were shown in full.
Student loan repayment terms explain why graduates feel trapped by debt New analysis from the Intergenerational Foundation, published Monday, puts a figure on it. An average earner on Plan 5, the loan scheme that has applied to every student starting university since August 2023, will repay £56,240 over their lifetime. Under Plan 1, the pre-2012 system, the equivalent figure was £25,700. For lower earners the gap is starker still: £6,430 then, £42,070 now, in today’s money. At higher income bands, loan repayments stacked on top of income tax and National Insurance can push the effective marginal deduction rate above 50%.
Behind those figures sits a quieter number. The government’s combined contribution to the cost of a graduate’s education, through teaching grants and loan subsidy, has fallen from 46% in 2015-16 to 8% today. The state has spent a decade handing the bill to the individual and calling it a loan rather than a tax.
How the terms got harsher
That shift began in 2012, when tuition fees trebled to £9,000 a year and were funded through loans rather than grants. Plan 5, introduced in August 2023, tightened the terms again: a repayment threshold of £25,000, below Plan 2’s £29,385, and a 40-year repayment term instead of 30. Every student receiving results this week enters that scheme automatically, regardless of what happens next in Westminster.
Something is happening next in Westminster, but it hasn’t reached students yet. The Treasury Select Committee, reporting on 7 July after 52,000 public submissions, found that the Department for Education and the Student Loans Company had conducted themselves in a manner amounting to mis-selling in three respects, and said ministers had a “moral obligation” to reverse a freeze on the Plan 2 threshold due from April 2027. Sir Philip Augar, who led the 2019 review of post-18 education, went further, telling MPs the changes to Plan 2 were “almost sneaky” and comparable in principle to the PPI scandal, since graduates “signed up to terms and conditions that were not properly explained.” Baroness Jacqui Smith, for the government, rejected the comparison as “wrong,” arguing the original loan contracts always allowed for changed terms.
Graduates who gave evidence to the committee put it more plainly: they feel used as cash cows to fund policies for older, asset-secured generations, pointing to the state pension triple lock, projected to cost £15bn a year by 2030, as untouched while their own repayments rise by stealth.
Who pays, and what happens next
It would be wrong to file this only under the last government’s mistakes. The 2025 Autumn Budget, delivered by Rachel Reeves, extended the Plan 2 threshold freeze for a further three years to 2030, a decision expected to add roughly £300 a year to typical graduate repayments, with no vote and little scrutiny. Education Secretary Lucy Powell says review of the loan system is “very much at the top of my in-tray,” and the Department for Education admits “the system we inherited is broken and unfair.” Neither statement changes the terms this week’s cohort is signing up to.
The Intergenerational Foundation wants the repayment rate cut from 9% to 5%, a change it says would save a typical graduate £16,000 over 15 years. That change, like the threshold reversal MPs have demanded, remains a recommendation, not a policy. On Thursday, the terms that apply are still Plan 5: a £25,000 threshold, a 40-year term, and a lifetime bill of £56,240 for the graduates who will spend the next four decades paying it off.
