Francesca Peters, 27, graduated with over £60,000 in undergraduate debt, but a master's loan pushed her total to £77,000. 'It just feels like a life tax,' she says. 'Because I'm never going to pay it off.' Peters is among a growing number of graduates calling for reform of the UK student loan system, particularly for postgraduate loans, which have been largely overlooked amid criticism of plan 2 undergraduate loans.
Postgraduate loan terms under fire
The repayment threshold for postgraduate loans is £21,000 a year, unchanged since 2016, compared to £29,385 for plan 2 undergraduate loans. Repayments are 6% of earnings above the threshold, versus 9% for plan 2. Interest accrues at RPI plus 3%, currently 6.2% (capped at 6% from September). Graduates with both loans make two separate monthly payments.
Mariella James, 22, completed a master's in sustainability and management at the University of Bath and secured a job as a social media manager. About £60 is deducted monthly for her master's loan, plus £15 for her undergraduate debt, bringing her total owed to £60,500. 'I choose not to look,' she says.
Growing debt burden
Student Loans Company figures show total outstanding student loans in England rose 10.5% to £294.6bn in 2025-26, with over £12bn of the £28bn increase due to accrued interest. Postgraduate lending rose 8.7% to £800m last year, and roughly £8bn of the near £300bn total pertains to postgraduate degrees.
Oliver Gardner, founder of the campaign group Rethink Repayment, says: 'The terms for the postgraduate loan are some of the most egregious out there. Because the repayment threshold is so low. And the interest rate that can be charged is always so high.' He adds: 'The big feeling is that – if you have both an undergraduate and a postgraduate loan – the financial burden is so significant that it’s holding them back.'
Calls for reform
Rethink Repayment wants the repayment threshold to keep up with wages, cap interest at inflation, and lower the plan 2 repayment rate to 5%. Gardner notes that the postgraduate threshold has been frozen since 2016. Peters agrees: '£21,000 in 2016 is now worth £29,000. That’s a big difference.'
After completing her master's in bioinformatics at Cranfield University, Peters entered a stable job in pharmaceutical data. Despite repaying £3,067 over four years, her balance increased due to £3,186 in added interest. 'They’ve designed the system so that, basically, you’re trapped,' she says. She suggests postgraduate loans should be interest-free.
James believes master's fees should be lowered to prevent excluding students from certain backgrounds. She felt like the 'odd one out' on her course because her parents did not pay her fees upfront. 'The current system is just tripping people up before they can really do anything with their lives,' she adds.
Government response
A Department for Education spokesperson said: 'We’ve raised the repayment threshold for plan 2 loans for the first time since 2021 and have capped maximum interest rates for plan 2 and postgraduate loans this year to protect graduates from rising costs. Graduates – especially those with postgraduate degrees – generally benefit from higher earnings, and repaying their loan is fair for those workers who have not gone to university or graduates on lower salaries.'
