| Practice area: | Education and Labour Markets |
|---|---|
| Client: | National Union of Students & the Higher Education Policy Institute |
| Published: | 13 April, 2026 |
| Keywords: | economics of education higher education 2026 Public Policy |
To support the Treasury Select Committee’s inquiry into student loan repayment terms, we were commissioned by the National Union of Students and the Higher Education Policy Institute to model the resource flows and cost implications associated with Plan 2 student loan repayment terms. The work focusses on the last cohort to be subject to Plan 2, which is those students who started in 2022-23.
Our analysis looks at the original Plan 2 terms before the Augar response when these students entered higher education and compares this to the changes made to the system a) after the Augar response announced in 2022 and b) in the November 2025 budget. We also model how the new Plan 5 repayment terms would hypothetically impact the 2022-23 cohort, and model an alternative stepped repayments system aimed to make the system more progressive whilst being cost neutral for the Exchequer.
We find that, while the new Plan 2 threshold freeze announced in November’s Budget has received substantial media coverage, earlier changes to Plan 2 that were implemented in response to the Augar Review resulted in much larger impacts on graduates.
The combined changes to Plan 2 since 2022 have significantly reduced the Exchequer cost of the system, from a net cost of £5.2bn for the 2022-23 cohort to a net surplus of £679m (a £5.9bn difference). The recently announced 3-year threshold freeze accounts for ‘only’ £1.3bn of that difference, whereas the Augar response changes account for £4.6bn. Further, we find important distributional effects of the changes to the repayment terms – while repayments have increased for low- and middle-income earning graduates, high-income graduates have been almost unaffected by the changes.
The full report is available on the Higher Education Policy Institute’s website here.