March 31, 2026

Student loans: questions about funding higher educations fees

Graduate unhappiness with retrospective changes to Plan 2 student loans has erupted following the Government’s November budget, in which adjustments were made to repayment thresholds. Student loans come in several different forms, from the early Plan 1 loans through to Plan 5 loans for those starting education in England after 1 August 2023.

The focus of dissatisfaction has centred on Plan 2 loans, taken out for undergraduate courses and Postgraduate Certificates of Education (PGCEs) since 1 September 2012 in Wales, and between 1 September 2012 and 31 July 2023 in England. But the issue touches all the different plans in various ways.

The situation has created genuine uncertainty for families with children approaching higher education age — and for those thinking further ahead about whether they can, or should, make plans to help meet the costs.

Which plan applies to your child?

The plan that applies depends not on the student’s nationality but on the location of the family home. Students starting higher education in England are now subject to Plan 5 loans, which charge interest at 3.2% RPI after graduation. The current repayment threshold for Plan 5 is £25,000 annually (£2,083 monthly or £480 weekly) of pre-tax earnings.

Plan 1 still applies to Northern Ireland residents, Plan 2 applies in Wales, and Scottish students are subject to Plan 4. A full breakdown of which plan applies in your situation is available on the UK Parliament website: Repaying your student loan: which repayment plan you’re on — GOV.UK.

Should you pay your child’s fees?

For parents whose children are still some years away from higher education, the most important step is to begin contributing to a long-term fund for their future. This can be done through your own ISA or by setting up a Junior ISA (JISA) in your child’s name. Using your own ISA gives you more control over the money, but may reduce the allowance available for your own long-term savings.

JISAs offer a generous £9,000 annual allowance. The money belongs to the child and cannot be withdrawn by a parent. From age 16, the child can take control of the account and manage the investments — though the funds cannot be accessed until they turn 18, when they gain full control over how the money is used.

For parents with children closer to higher education age, helping to pay fees may be possible, but the decisions become considerably more complex. There are several significant factors to weigh up carefully.

Key considerations before helping with fees

Understand the loan terms first

Before making any decisions, it is essential to understand which plan your child would be on and what the repayment terms look like in practice. Most parents will find their children subject to Plan 5 loans. While Plan 5 carries a lower interest rate than some earlier plans, the repayment threshold is low relative to likely starting salaries. With the National Minimum Wage rising to £12.71 per hour from 1 April 2026 for over-21s — equivalent to approximately £24,799 per year on a 37.5-hour week — many graduates will find themselves within a very short distance of the repayment threshold from their first job.

Protect your own financial position first

It is equally important to consider any planned contribution within the context of your own finances. Would helping your children or grandchildren have a material impact on your own long-term savings? Your retirement security must come first. Tuition fees can reach as much as £9,790 per year — a substantial burden, particularly for families with more than one child — and graduates leave university with an average debt of more than £53,000.

Consider your child’s career path

The nature of the degree and the likely earning trajectory matters enormously. Graduates entering professions such as medicine or law typically move into higher salaries relatively quickly, which means loan repayments are likely to be manageable and the debt cleared within a reasonable timeframe. For those entering careers with lower starting wages, however, the picture is very different — they could face paying their loans indefinitely until they are written off at the 30 or 40-year mark.

Have an honest conversation

It is worth having a frank conversation with your children about what taking on significant student debt really means, and how — or whether — you might be in a position to help. These are not easy conversations, but they are important ones.

How we can help

You do not need to work through these decisions alone. Whether you are planning ahead from an early stage or navigating decisions now, an independent financial adviser can help you model the options and find the approach that best balances your family’s finances with your children’s future. Our cashflow modelling tool illustrates the impact of different financial choices in a clear and straightforward way. If you have not been through cashflow planning recently — or at all — do get in touch. We are happy to help.

Sources and further reading

Disclaimer: information is based on publicly available data and government announcements at the time of writing (March 2026) and may be subject to change.

Risk statement: The financial information contained within this article is our opinion and for guidance only, and does not constitute advice which should be sought before taking any action or inaction. The value of your investments (and any income from them) can go down as well as up. The Financial Conduct Authority does not regulate estate planning, tax advice, cashflow planning, powers of attorney, or wills.