Helen Lambert borrowed £57,000 to go to university and began repaying her student loan in 2021 after starting work as an NHS nurse.
Since then she has repaid more than £5,000, typically having about £145 a month taken from her pay packet. But everything she hands over is dwarfed by the £400-plus of interest that is added to her debt every month, thanks to rates that have been as high as 8%.
Her total outstanding debt had ballooned to more than £77,000 by the end of November, and it is set to get a lot bigger as there are another 25 years left of the 30-year repayment period.
Lambert does not think her studies should have been free, but she says: “It is so disheartening to have this level of debt hanging over you with no achievable way to clear it or even reduce it while they add on upwards of £400 a month in interest.”
She was particularly unlucky because from 2017 to 2020 – the three years she was at university – there was little financial help available for nursing students. NHS bursaries, which covered tuition fees and some living costs and were worth up to £16,454 a year, were axed in August 2017, just weeks before she started her course. It was not until September 2020, after she had graduated, that the government introduced a partial replacement in the form of a grant worth at least £5,000 a year to help with living costs.
Lambert is one of millions of graduates who have a plan 2 student loan. They include the 29-year-old Labour MP Nadia Whittome, who this month posted on Instagram that she had left university in 2019 with £49,600 of debt and then a few months later became an MP, giving her a salary “that puts me in the top 5% in the country”. Six years on, her repayments have shaved just £1,000 off that debt. “If MPs are barely making a dent in their student loan debt after six years of repayments, what chance do other graduates have?” she said.
In last year’s budget Rachel Reeves turned the screw even further on people such as Lambert. The chancellor froze the salary threshold for plan 2 loan repayments for three years – which means borrowers will have to pay even more towards their student loans as they benefit from pay rises.
The move has fuelled fresh calls for student loan debt to be rebranded as a graduate tax. It certainly works like one: graduates simply pay 9% of everything they earn over the threshold, regardless of how much they owe, and it is collected through the payroll, just like income tax. Crucially, the loans are written off after 30 years, and most plan 2 borrowers will never repay their loans in full.
The basics
Student finance is made up of a tuition fee loan, which covers course fees and is paid directly to the university, and a maintenance loan, which is designed to help with costs such as rent and food.
Both need to be paid back, and interest is added to the balance each month from the moment the first payment is made to the student and/or their university, until the loan has been repaid in full or written off.
When someone starts repaying their student finance and how much they pay depend on which repayment plan they are on (they don’t choose). There are five plans for UK borrowers, each of which works in a different way.
Plan 2 loans such as Lambert’s were taken out by students from England who started university between September 2012 and July 2023, and students from Wales who have started since September 2012.
Graduates have to repay 9% of everything they earn over a threshold – now £28,470 a year. So if someone is earning £38,470, their annual repayment is now £900.
The interest rate on plan 2 loans is linked to the RPI rate of inflation and can vary from month to month: in August 2024 it hit 8%. The loans are written off 30 years after you were first due to start making repayments, which is the April after you leave university. The debt is wiped even if you haven’t paid anything.
How the debt grows
Lambert, 33, attended Edinburgh Napier University, and took out a tuition fee loan and a maintenance loan from the Student Loans Company. Although she studied and now works in Scotland – in a high dependency unit within NHS Highland – she was born in England and living there when she applied.
She borrowed a total of £57,958, and interest began to be added to the first loans in September 2017. During her time at university, her debt accrued interest at between 5.4% and 6.3%.
She qualified in 2020 during the pandemic, graduated early and set to work in a Covid ward in Edinburgh. In May 2021, she made her first repayment. Between then and the end of March 2025, she repaid just under £4,000; over the same period £15,176 was added in interest. By April 2022, her debt had risen to £66,648, and by the end of November 2025 it had hit £77,359.
Her monthly repayments vary because her earnings depend on whether she has worked weekends or night shifts or done overtime. During 2024-25, the repayments deducted from her pay ranged from £78 to £263. Meanwhile, the interest added each month has sometimes been as high as £488.
“My student loan is not ‘bad debt’ – it would not go against me if I apply for financial loans etc,” she says. “It will also be wiped after 30 years regardless of the remaining balance, which I will never clear, but … each month I’m forced to pay a sizeable sum to a pointless debt.
“My payments don’t go against the principal balance – they are not even making a mark on the interest accrued.”
Lambert’s outstanding debt will be a lot higher than that of many students who received an NHS bursary or benefited from the support introduced in September 2020, which does not need to be paid back.
There were calls from unions and politicians for those who missed out to receive backdated funding or a reduction in their loan repayments, but ministers ruled this out and it is understood this is no longer a live campaigning issue.
“I find it outrageous that students of the 2017-20 cohort were not reimbursed,” says Lambert, who has not given up hope that the government might have a rethink.
She agrees with the idea of rebranding student loan debt as a graduate tax, and adds: “I don’t know anyone in my situation who is ever going to be able to pay that sort of sum off.”
The budget changes
The salary threshold at which repayments kick in will rise to £29,385 in April.
Normally it would have been expected to then rise again each year. However, Reeves announced it will stay frozen at that level until 2030.
Freezing the threshold as wages go up means more people will have to start repaying their loans as the amount they are earning goes over the limit. Those already over the threshold who get pay rises will have to repay 9% of a bigger chunk of their earnings.
What can those in this situation do? Managing the debt
Many, like Lambert, are bothered by this huge debt hanging over them.
Some might assume that if they have spare cash, they should make extra payments to shrink the debt and clear the loan early. But experts suggest that for most, overpaying is not a good idea.
Save the Student, a student money website, says that unlike most other types of debt, “it’s not always the best idea to make extra repayments … It’s unlikely you’ll repay your loan in full before it is cancelled, so making the extra repayments just means you’ll be paying back more than you need to in the long run”.
Save the Student and the MoneySavingExpert founder Martin Lewis say that pretty much the only plan 2 people who should be overpaying their student loan debt are very high earners and those with very strong salary prospects ahead of them.
Lewis’s MoneySavingExpert.com website has a student loan calculator that plan 2 people can use to get an idea of whether they are likely to be in this category.
“If you have the qualifications and drive to pursue a very high-paying career, paying off your loan early could save you money (as the interest will have less time to accrue),” says Save the Student.
If your earnings are near the threshold it is worth checking if you are due a refund. You will make a repayment via your pay if your income goes over the weekly or monthly threshold for your plan – which might happen if you work extra shifts or receive a bonus. For plan 2 loans, these thresholds are now £547 and £2,372 respectively.
However, you can ask for the money back at the end of the tax year if your annual income comes to less than the yearly threshold.
In 2024-25, 643,000 people with a plan 2 loan were entitled to request a refund of the overpayment(s).
‘Fair choices’
Guardian Money asked the Department for Education about people in Lambert’s situation. It says: “This government is making fair choices to make sure the student finance system is sustainable – protecting taxpayers and students.
“We’re raising the plan 2 student loan repayment threshold for the next academic year, meaning a graduate earning £30,000 would repay only about £4 a month in 2027–28.
“The freeze will not impact anyone who started their course after August 2023, and lower-earning graduates will continue to be protected, with loans and interest written off after 30 years.”
