In England, a master's graduate who also carries undergraduate debt is not repaying one loan with a bit extra on top. They are repaying two separate loans, under two separate systems, deducted from the same paycheck at the same time.

Two systems, side by side

Undergraduate loans sit on one of several repayment plans. Most recent graduates are on Plan 2 (for courses started between 2012 and 2023) or Plan 5 (from 2023 onward). Both take 9% of income above a threshold — £29,385 a year for Plan 2 and £25,000 for Plan 5, according to the UK government.

The Postgraduate Master's Loan is a different product. It lets students in England borrow up to about £12,858 toward a master's, and its repayment works on its own terms: 6% of income above a threshold of just £21,000 a year — a figure that has been frozen since the loan launched in 2016. Interest runs at the retail prices index plus 3 percentage points, with the government having announced a cap of 6% from September 2026, GOV.UK says.

Crucially, the two loans are assessed independently through payroll. An employer receives separate instructions for each and deducts both.

Where it bites

For someone holding both, the deductions stack. A graduate on Plan 5 earning £30,000 pays 9% on the £5,000 above the undergraduate threshold and, at the same time, 6% on the £9,000 above the postgraduate threshold — close to £1,000 a year before any income tax is calculated. Once income tax and National Insurance are added, the effective rate on each extra pound earned in the band where both loans apply climbs well above 40%.

The frozen £21,000 postgraduate threshold is the heart of the complaint. Martin Lewis, the founder of MoneySavingExpert, has pointed out that it now sits below the annual earnings of a full-time worker on the minimum wage — meaning repayments begin for graduates on even modest starting salaries.

There is a further wrinkle. With undergraduate loans, many lower and middle earners never clear the balance, and it is written off after a set period; for them, the headline interest rate is somewhat academic. The postgraduate loan is smaller and its threshold lower, so a larger share of borrowers repay it in full — which turns the interest rate from an abstraction into a real, cumulative cost.

What the government says

Repayment thresholds are reviewed annually, the House of Commons Library notes, but the postgraduate floor has not moved in a decade. The interest cap arriving in September 2026 offers modest relief on the cost of borrowing; there has been no announcement of a rise in the £21,000 threshold, which campaigners argue is the more pressing issue for graduates early in their careers.

The bigger picture

The postgraduate loan was introduced to widen access to master's study, which had long depended on family money or employer sponsorship. More than 200,000 are taken out each year, and with every graduating class the group carrying both undergraduate and postgraduate debt grows. The system is working as designed — two loans, two deductions, collected in parallel. Whether that design still fits a world of frozen thresholds and modest graduate starting pay is the question the government has yet to answer.