Postgrads and parents have reason to be furious about what was buried in the budget too

Let’s start with postgraduate Master’s loans – the ones on Plan 3.

When they were introduced back in 2016, the policy was designed to be broadly cost-neutral to government, and the combination of Retail Price Index (RPI) plus 3 per cent interest from day one, a £21,000 repayment threshold, and the generally higher earnings trajectories of Master’s graduates meant the Treasury expected to get back roughly what it lent out in present value terms.

The original consultation from the Department for Business, Innovation and Skills (BIS) said the threshold would be “frozen for five years” – the working assumption was that it would uprate by inflation beyond that.

But the threshold has stayed at £21,000 ever since – through the inflation spike of 2022-23, through the cost of living crisis, through everything. If it had risen with RPI-X from April 2022 onwards, it would now be sitting at around £25,000 – instead, it remains frozen at £21,000.

And if the freeze continues through to the 2029 pre-election period, assuming RPI-X averages around 3 per cent annually, an inflation-adjusted threshold would be approaching £29,000 by then.

What does that mean in practice? Take a Master’s graduate earning £30,000 a year today – under the frozen threshold, they’re repaying 6 per cent of £9,000, which works out at £540 a year. If the threshold had been uprated to £25,000, they’d be repaying 6 per cent of £5,000 – just £300 a year. The freeze already costs them £240 a year, or £20 a month.

By 2029, the picture gets worse. That same graduate – whose salary might have risen to around £34,000 with wage growth – would be repaying 6 per cent of £13,000 under the frozen threshold, or £780 a year.

Under an inflation-adjusted threshold of £29,000, they’d be repaying 6 per cent of £5,000 – just £300 a year. The cumulative cost of the freeze would by then be £480 a year, or £40 a month, representing a 160 per cent increase in their repayments compared to what an inflation-adjusted system would demand.

And none of that takes into account the amount of commercial debt they’re doubtless in because the quantum of the loan doesn’t go near covering living and tuition costs, or their Plan 2 or 5 UG repayments.

Plan 3 loans are different from undergraduate loans – the interest rate formula is always RPI plus 3 per cent, regardless of income. There’s no taper, meaning a graduate on £25,000 pays the same interest rate as one on £75,000. When RPI spiked in 2022-23, the formula would have pushed rates above 12 per cent – but a prevailing market rate cap, which applies to Plan 3 as well as Plan 2, held them to around 6-7 per cent during that period. Even so, the current rate is running at 6.2 per cent.

The latest estimates from the Department for Education (DfE) calculate the Resource Accounting and Budgeting (RAB) charge on Master’s loans at minus 20.6 per cent. The government expects to make 20.6p on every pound it lends for postgraduate study. These loans are deeply, structurally profitable.

When Master’s loans launched, the RAB assumption was roughly zero. Now it’s strongly negative, and the threshold freeze is one of the main reasons why – every year the threshold stays frozen while earnings rise, more graduates cross it earlier, repay more, and reduce the expected write-off.

It’s a stealth increase in the effective graduate tax rate, achieved not through legislation but through inaction.

Sibling squeeze

The other buried change affects families with two children at university at the same time.

Right now, if you’ve got two kids studying, Student Finance England recognises that your household income has to stretch further, and the system calculates an “assessed contribution” based on your income, then splits it between the students.

So if you’re on £60,000 and the system reckons you can afford to contribute £2,579 towards your child’s living costs, having two children studying means that contribution gets divided – roughly £1,290 each, with each child’s maintenance loan correspondingly higher.

This is set out in the Student Loans Company (SLC) practitioner guidance, which describes it as “split contributions” – the contribution payable “is divided by the number of children holding relevant awards”.

Let’s work through what this actually means in cash terms. At £60,000 household income, with one child studying away from home outside London, the 2025/26 Financial Memorandum shows an assessed contribution of £2,579 and a resulting maintenance loan of £5,273.

With the split contribution rule, two children from that household would each face an assessed contribution of £1,289.50 – call it £1,289 – and using the tables in the Financial Memorandum, that works out to a maintenance loan of around £6,563 each, giving a total across both students of £13,126.

But it’s changing. Buried in the OBR docs was a decision to scrap the split contribution arrangement – in the brave new modular world of the LLE, the SLC apparently doesn’t want the administrative hassle of tracking who else in the family is studying and constantly recalculating the split, so they’re ditching it.

Without split contributions, each student is assessed as if they’re the only one studying – same £60,000 household income, same £2,579 assessed contribution, but now applied in full to each child. That means a maintenance loan of £5,273 each, for a total of £10,546.

The difference? Each student loses £1,290 per year, and the household as a whole loses £2,580 per year. If your two children’s degrees overlap by three years – which they will if they’re close in age and both doing standard three-year courses – that’s £7,740 less in maintenance support across the overlap period, or to put it another way, £7,740 more that the government expects you to find from your own pocket.

It hits middle-income families hardest. If your household income is below £25,000, your children already get the maximum loan – there’s no contribution to split. If you’re well above the threshold, you’re already at or near the minimum loan and the split doesn’t make much difference. But if you’re in the taper zone – say £40,000 to £80,000 – you’re the ones who benefit most from the current arrangement, and you’re the ones who lose most when it goes.

The National Union of Students (NUS) has been tracking this, and their recent research with Survation found that 86 per cent of parents contribute financially to their children at university, with the majority spending over £200 a month during term time. One in ten are spending over a thousand a month, and now, for families with multiple children studying, the expectation just got higher.

And because the threshold over which parents have to put in remains frozen at £25,000, if that’s also still frozen by that 2029 pre-election period, the impact will be much more significant.

Death by small print

Both of these changes share something in common – they weren’t announced with press releases or ministerial statements. There was no “we’re making Master’s loans more profitable” announcement, and no “we’re scrapping support for families with two kids at uni” headline – they were buried in technical documents, implemented through inaction or regulatory tidying-up, and passed without meaningful parliamentary scrutiny.

Ministers like to talk about “fairness” in the student finance system – usually when they’re explaining why graduates should pay more. But there’s nothing fair about a system where the repayment threshold erodes in real terms year after year, where families with two children studying suddenly find their support cut, and all of it happens through technical changes that never get properly debated.

The Plan 2 threshold freeze has finally got some attention. Maybe now’s the time to ask what else is lurking in the small print.