UK graduates face mounting student debt, with postgraduates particularly burdened by double loan obligations. Over £294.6bn in total student debt was reported in 2025-26, as calls grow for reforms to repayment terms and interest rates.
Francesca Peters, a 27-year-old biochemistry graduate, describes her £77,000 student debt as “a life tax” that feels impossible to escape. Her situation reflects a broader crisis: the total amount owed in UK student loans surged 10.5% to £294.6bn in the 2025-26 financial year, with postgraduate borrowers facing particularly harsh terms. The Guardian reports that postgraduates struggle to manage both undergraduate and master’s loans simultaneously, paying 6% of earnings over a £21,000 threshold compared to 9% for undergraduates.
Postgraduate Loans: A System Under Fire
Postgraduate loans, which accrue interest at the retail prices index (RPI) plus 3%, have drawn sharp criticism. Oliver Gardner of Rethink Repayment calls them the most egregious
in the UK system, citing a repayment threshold frozen since 2016. £21,000 in 2016 is now worth £29,000,
he argues, noting that graduates like Peters face escalating debt even as their incomes rise. For example, Peters’ balance grew to £60,500 despite repaying £3,067, as £3,186 in interest was added.
The financial strain is compounded by the dual burden of undergraduate and postgraduate loans. Mariella James, a 22-year-old sustainability graduate, pays £60 monthly toward her master’s debt alongside £15 for her bachelor’s. I choose not to look
at her total owed, she says.
Plan 2 Loans: A 9% Repayment Rate and Frozen Threshold
However, Chancellor Rachel Reeves’ November 2025 Budget froze this threshold until 2030, rather than rising with inflation.
The interest rate for Plan 2 loans takes on interest at the Retail Prices Index (RPI) measure of inflation, plus up to 3% depending on earnings. Yet campaigners argue this remains excessive. Loans should act like loans, not a tax you’re stuck with for life,
Gardner says.
Public Outcry and Calls for Reform
The Broader Implications of a Debt-Driven System
With postgraduate loans accounting for roughly £8bn of the near £300bn outstanding student loans debt, the government faces pressure to address systemic inequities. Meanwhile, the average graduate in England leaves university with debts of more than £47,500, according to NZ News Yahoo, though this figure varies by region and course.
Rethink Repayment’s proposed changes include wanting the repayment threshold to keep up with wages, to cap the interest at inflation, and for the repayment rate on plan 2 to be lowered to 5%. For now, however, borrowers like Peters and James remain trapped in a system they argue was designed so that, basically, you’re trapped.
