Written by Amy O’Donoghue
Discussion around the student loan system in England has surged following a debate in Parliament, in which over 20 Labour MPs made calls for changes to the current system. Starmer responded to concerns by stating that the government would look at ways to make the system ‘fairer.’
In a recent debate led by Jas Athwal (MP for Ilford South), interest rates and changes to repayment terms were the major topics of contention. Athwal called for the salary threshold at which people begin to repay loans to be raised. It was announced last year by the Chancellor that this threshold would be frozen for those on Plan 2 loans from 2027, meaning repayment amounts will rise for many, as inflation will make more income taxable. Plan 2 loans are for those who started university between September 2012 and July 2023.
MPs criticised the change in Westminster, condemning the reform as a retrospective change to the original terms of the loan. Athwal also pointed out that monthly interest payments can often exceed the amount being paid off by the loan and claimed that students feel ‘bled dry by a system that just keeps taking from them’. Bell Ribeiro-Addy, MP for Clapham and Brixton Hill, stated that the terms of student loans were like “something a loan shark would offer.
Although Starmer did promise to look into making the system fairer, he also defended the threshold freeze, citing “enormous pressure on budgets”. He also highlighted that the average Plan 2 borrower would only pay £8 more per month.
MPs also called for interest rates to be reduced, including Conservative leader Kemi Badenoch. Currently, the Retail Prices Index (RPI) is used to calculate interest. For those on Plan 2, the interest is RPI plus up to 3%, dependent on earnings. RPI has been criticised for overestimating inflation and has allowed debt to rise faster than repayments for some.
The National Union of Students UK have condemned the current system, claiming that “the student loan system isn’t working for anyone.” They described changes such as the threshold freeze as “political football impacting our bank balances each month, and have called on the Chancellor to reverse the freeze and reform interest rates to prevent balances growing faster than repayments. They have received over 11,000 signatures so far on a petition in support of these aims.
