Student loans are trapping a generation, and it’s getting worse

Buried in the 2025 Budget was a decision with huge consequences, freezing student loan repayment thresholds into the end of the decade. The Chancellor, Rachel Reeves, has described the system as “fair and reasonable”.

Graduates do not experience it that way. In our new Organise research, thousands of people describe the same “balance goes up while paying” paradox, a system that was sold as manageable, then tightened after the fact through high interest and frozen thresholds.

Student loans now operate like an extra, automatic monthly deduction that rises when you earn more, while balances can still grow because interest can outpace repayments.

This blog pulls out the big themes from the report, and what we can do next.

What graduates told us

Between 22 January and 9 February, Organise surveyed 3,209 people about student loans and how the system is shaping their lives. Here’s what they said:

• 82% said they were not fully educated on the terms when they took the loan out.
• 84% said fairer student loan policies would influence how they vote at the next election.
• 87% said a 6.2% Plan 2 interest rate is not fair.

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1) “This feels like mis-selling”

People describe being reassured at 17 or 18 that student loans were “not real debt”, that repayments would be small, and that the system would stay fair. Then the terms changed around them, interest rose, thresholds froze, and the balance kept climbing. That sense of being sold one thing and living another is why graduates are calling it the next mis-selling scandal, not because they regret studying, but because the rules moved after they signed up.

This is also why “fiscal drag” matters. Financial journalists like Claer Barrett have pointed out that graduates can be hit by a double squeeze, frozen thresholds mean more income is dragged into repayment, at the same time as tax thresholds stay tight.

2) Cost of living, but with a graduate surcharge

Across the survey, people describe repayments as the difference between coping and not coping, especially with rent, bills, transport and food all higher than a few years ago. The UK’s inflation shock may have eased, but prices are still permanently higher than pre-crisis levels, and rents have kept rising too.

Plan 2 repayments are 9% above the threshold, taken automatically through payroll. Postgraduates can be hit with an additional 6% on top, meaning some people lose 15% above the threshold before income tax and National Insurance are even considered.

3) Housing, harder to save and harder to borrow

Graduates describe the double bind, repayments reduce what you can save for a deposit, and lenders can treat the monthly deduction as a hit to affordability. Some people report being rejected outright, while others pushed onto worse deals because they fail affordability checks for the cheaper products.

That lands in a housing market where rents have risen sharply in recent years, and getting on the ladder increasingly depends on family wealth.

4) The motherhood penalty, interest grows while income drops

The student loan system doesn’t pause when your work life pauses. Respondents describe interest accruing during maternity leave and reduced hours, stretching repayment timelines and adding thousands to what they repay over their working life. For single parents, the squeeze is even sharper, especially where Universal Credit calculations don’t reflect take-home pay after student loan deductions.

5) Inequality, the “working class penalty”

Graduates from lower income backgrounds describe starting adult life with larger debts because they had to borrow more just to live while studying. Meanwhile, peers with parental support can graduate with far smaller balances, or none at all. The system doesn’t just reflect inequality, it can deepen it, by slowing home ownership, savings, and family formation for people without wealth to fall back on.

6) No choice but debt, paying to serve society

Nurses, doctors, teachers, paramedics and social workers describe the same contradiction: their degrees are essential to do the job, yet they repay for decades. Some report turning down extra shifts because the combined marginal hit of tax plus student loan makes the work feel not worth it, at the exact moment public services are under strain.

Why the “threshold freeze” is a big deal

Freezing repayment thresholds pulls more people into repayment and increases what they pay each year, even if real wages are flat. The Plan 2 threshold is set to rise to £29,385, then be frozen for three years from April 2027, effectively holding it down into 2030.

That matters because if your repayments don’t beat interest, you can pay every month and still watch your balance rise.

How we got here, and why it didn’t have to be this way

England made choices that other UK nations did not.

• England replaced maintenance grants with larger maintenance loans from 2016/17, increasing the amount many low income students had to borrow just to get by.
• Scotland and Wales use different approaches that reduce the scale of debt and the exposure to compounding interest, showing this outcome is a policy choice, not an inevitability.

What we’re calling for

Our recommendations are about immediate relief, and long term fairness:

1. Scrap student loan interest, or at minimum cap it so balances can’t grow in real terms while people are repaying.
2. Reverse the threshold freeze, and uprate thresholds automatically so repayments stay genuinely income-contingent.
3. Protect parents and carers, pause interest during maternity, parental and adoption leave, and fix Universal Credit interactions so support reflects take-home pay.

What you can do today

If we want change, we need political cost. That means thousands of us acting together, so MPs can’t ignore it and ministers can’t wave it away as “technical”.

• Sign the petition to Rachel Reeves to scrap interest and lift repayment thresholds.
• Email your MP to demand action, and to push for an inquiry into whether the system was mis-sold and who is being hit hardest.

When enough constituents contact MPs on the same issue, it stops being background noise and becomes a parliamentary problem. That’s how change starts.