Student Loan Repayment Plans

Wednesday 25th February 2026 Westminster Hall

09:30

[Jas Athwal (Ilford South) (Lab)]

I beg to move,

That this House has considered student loan repayment plans.

It is a pleasure to serve under your chairship, Ms Lewell. Students across the country have been protesting the unfairness of the student loan system—a system that millions of young people believe is rigged against them and in urgent need of reform. On that I suspect there will be broad agreement—at least I hope so. But this system did not appear by accident. It was designed in 2012, expanded thereafter and defended for over a decade by people who now criticise it.

[Olly Glover (Didcot and Wantage) (LD)]

I was not intending to intervene, but I am afraid what the hon. Member said is not correct. Tuition fees were first introduced by the Conservative Government in the early 1990s and then by the Labour Government in 1998, with top-up fees in 2004. Will he accept that and then proceed?

[Jas Athwal]

I will expand on this as I go on, because I think everybody is involved, and I shall distribute responsibility fairly across the board.

Since 2012, around 5.8 million people have taken out plan 2 loans. They were told that university was the gateway to opportunity, that it would pay for itself and that repayments would be manageable. Instead, many now feel that they signed up at 18 years of age with no financial advice and no lived experience to a 30-year financial commitment where the rules can be changed unilaterally, arbitrarily and without consultation.

[Richard Burgon (Leeds East) (Lab)]

I congratulate my hon. Friend on securing the debate. Graduates are making massive repayments—9% of their earnings. As he says, they will be paying this debt off for decades, and having to do that is breaking a whole generation. As a society, it is time we had a serious discussion about cancelling student debt, which would provide immediate relief to young people. Does my hon. Friend agree that we should instead fund higher education through progressive taxation?

[Jas Athwal]

I think the whole system needs to be reformed. Tinkering around the edges is not going to cut it any more; we are looking for a much fairer system.

[Rachael Maskell (York Central) (Lab/Co-op)]

I have spoken to the students’ unions at York St John University and the University of York, as well as many graduates, who have told me that a student loan does not even cover the cost of living in our city because housing is so expensive—not only does it put people in debt for the future, but it does not even meet the need now. I believe progressive taxation is the way forward, so that the more someone earns, the more they can pay back into the system, to invest in education, which benefits us all.

[Jas Athwal]

I agree that we need to reform this system and look at other ways of doing it. That is the ethos of my ask today: for the Minister to go away and really think about this. I do not want to look at the whole process in this debate, but I want to ensure the Minister is aware of the feeling in this room that we must look at the whole system.

Let us remember how we got here, because I have been reminded of a bit of history. The Conservative party trebled tuition fees to £9,000 in 2012, and the Liberal Democrats, having pledged to oppose any increase, walked through the Lobby to make it happen. This system was not inevitable; it was legislated for. Let me be clear: I do believe that those who benefit from education should contribute to its cost, but fairly, and those who earn more should repay more, fairly. That principle of fairness needs to be the golden thread going through the whole system.

[Mr Luke Charters (York Outer) (Lab)]

I am on plan 2, which is a dog’s dinner of a system. Like me, is my hon. Friend not surprised that the architects of this Frankenstein’s mess are not even here for the debate? Our generation is picking up the cost of their mess.

[Jas Athwal]

I agree with my hon. Friend; we must be clear where the blame lies. It is not fair that a system created by one party and enabled by another is now presided over by my own party, who will clear up the mess. The system burdens millions, such as my hon. Friend, with balances they may never clear. It follows the letter of the principle while violating its spirit. Many believe that the plan 2 loans system is predatory, regressive and kills graduates’ ambitions with stressful spiralling interest.

[Natasha Irons (Croydon East) (Lab)]

I have enjoyed the perks of being an elder millennial, graduating in 2004 as a plan 1 student. The retrospective changing of the threshold, burdening plan 2 students with debt, is unbelievable, as is linking interest to the retail price index not the consumer prices index, which the Office for Budget Responsibility has discredited. Does my hon. Friend agree that addressing fundamental fairness means changing those structural factors that came in after people signed up to the agreements?

[Jas Athwal]

I will later make the point about the structural imbalance that needs to be corrected. This situation is not just stressful for students; it should also concern the Treasury. Under plan 2 loans, graduates repay 9% of income above £28,470 this tax year. From April, that threshold rises to £29,385. Interest accrues from the moment the first payment is made to a university, long before students have graduated.

[Dr Roz Savage (South Cotswolds) (LD)]

Just a couple of weeks ago, I was contacted by a constituent who graduated in 2021 and has already accrued more than £6,000 of interest on her initial debt of £41,000. I was one of the lucky ones: as the first in my low-income family to go to university, I had tuition and maintenance paid. That was a great opportunity and leveller and, without it, I do not think I would be here now. Does the hon. Member agree that students and graduates have been at the mercy of arbitrary decision making for far too long, and that everyone deserves the right to pursue higher education, regardless of their class or generation?

[Jas Athwal]

I absolutely agree. This is so important, which is why we are here to look at the system.

Interest accrues from the moment the first payment is made, and it is linked to RPI, with the current maximum rate of 6.2%. Here is the stark reality: in 2024-25, plan 2 loans accrued £12.6 billion in interest, while borrowers repaid just £2.8 billion. In a single year, interest added to balances was more than four times the amount repaid. That is not a slogan but official data.

When graduates open their statements and see their balances rising, despite working hard and repaying every month, their anger is not ideological—it is rational. Students finishing university in 2024 entered repayment with an average debt of £53,000. That is the price tag now attached to aspiration. That burden falls unevenly, as those from wealthier families often avoid large maintenance borrowing and high earners quickly clear balances and reduce interest exposure. But the vast majority of middle earners—our nurses, teachers, engineers and small business employees—repay for decades, and most will never clear the balance.

[Jess Brown-Fuller (Chichester) (LD)]

Does the hon. Gentleman agree that this issue disproportionately affects women and those who have caring responsibilities? I have a constituent who was successfully paying down her student loan. She took a few years off to have children, and when she came back to the employed world, her bill was bigger than when she left university, so the starting point was higher. She knows that she will be paying it off until she retires. Does the hon. Gentleman agree that that is an unacceptable situation to be in?

[Jas Athwal]

The hon. Lady makes a valid point. I wholeheartedly agree that the system is rigged against working women who take time out to have children, so we need to make it fairer.

A graduate constituent of mine told me that she was the first woman in her entire lineage to go to university and get a degree, but she feels that that proud moment in her family’s history has been taken away from her by the regret that she has accrued a huge debt. The issue is not an isolated to Ilford South. As we hear from hon. Members across the Chamber, all across the country a whole generation feels bled dry by a system that keeps taking from them.

Another constituent told me that he left university with £64,000 of debt. Four years of repayment later, he now owes more than £99,000. This is not shared sacrifice, but a structural imbalance. We often speak of aspiration, but aspiration cannot thrive under compound interest designed in Whitehall. The repayment threshold sits only a few thousand pounds above the full-time minimum wage. Repayments begin early, just as graduates are finding their feet. People face income tax, national insurance, pension contributions, council tax and rent or, for those who are fortunate enough, a mortgage—and then we add 9%. For many, this does not feel like a loan; it functions as a long-term graduate tax, but without the honesty of calling it one.

From April 2027, the repayment threshold is scheduled to be frozen for three years. Freezing thresholds during wage growth means that more income falls into repayment. It increases lifetime contributions and tightens the squeeze on those who are already stretched. Yes, it improves Treasury forecasts, but is that really the motivation? Fairness is not measured only by spreadsheets. Outstanding student loan balances are projected to reach £500 billion in today’s prices by the mid-2040s.

[Ben Lake (Ceredigion Preseli) (PC)]

I am grateful to the hon. Gentleman for making such a powerful speech. Does he share my concern that one of the other consequences of these changes might be that fewer young people decide to go to university? That would obviously be to their detriment, but it would also be to the detriment of society in more general terms.

[Jas Athwal]

I agree, and I will make that point shortly. This is not only a graduate issue, but a fiscal time bomb. In 2024-25, write-offs recorded in Department for Education accounts rose to £310 million, up from £121 million the year before. The longer this system continues without reform, the more unstable it becomes for borrowers and Governments alike, and then where is the ambition? Every pound earned above the threshold attracts a 9% deduction, on top of existing taxes. The marginal deduction rate that many middle earners face is far higher than the headline rate suggests. Perception shapes behaviour. If progression feels like it is punished, and if promotion feels like a heavy deduction rather than a reward, morale suffers.

This generation did what we asked of them—they studied, trained and qualified—but many feel let down and misled. So what must change? Not the principle of contribution, because their education has to be paid for, but the fairness of the design. The Minister and the Government urgently need to reconsider the following, and I hope hon. Friends will add to this list: first, whether freezing thresholds is justified in a cost of living crisis; secondly, whether to raise the threshold to alleviate hardship and make the system fairer; thirdly, whether RPI remains an appropriate benchmark for interest calculations; and fourthly, whether a 9% repayment rate disproportionately affects middle earners and should be reduced.

Perhaps it should be a combination of all of the above, because tinkering at the edges will not suffice. Neither will knee-jerk reactions: some of the proposals I have heard, such as cutting the interest rate without addressing the structural flaws, offers only headlines, not solutions. Those who designed the system cannot now pretend they bear no responsibility for its consequences, when they had 12 years to get it right. Equally, suggesting we cut certain courses, as some have suggested, simply because the graduates on those courses repay less, confuses economic return with social value.

[Liz Jarvis (Eastleigh) (LD)]

I thank the hon. Member for securing this important debate. On the point about some courses being preferable to others, does he agree that it is vital that children from disadvantaged backgrounds have access to the creative industries and are able to pursue careers in those industries if they want to, and that it is shameful to suggest that those courses are somehow worth less than others?

[Jas Athwal]

I wholeheartedly agree. Some of those suggestions have made me cringe. University enriches our society, expands horizons and fuels innovation, and today’s young people deserve to have the same choices as those who now seek to restrict them. It is our duty to reform a flawed system that is unfairly trapping millions of young people in debt. Student loans were presented as an investment; for too many, they now feel like a sentence.

[Ms Julie Minns (Carlisle) (Lab)]

My hon. Friend is making a powerful speech, and he has set out comprehensively the issues that we look to the Government to examine. Does he agree that the Government have begun to take very welcome steps in reforming student finance, in particular the changes to the plan 5 loan system? We are looking for the same consideration when it comes to plan 2 loans.

[Jas Athwal]

I thank my hon. Friend for making that point. I agree that the Government need to be applauded for doing a lot of things right, but we are asking them to go further. For many, especially those on plan 2, their loan feels like a sentence—a sentence that lasts 30 years, a sentence that previous generations never faced on this scale, and a sentence that shapes life decisions, from postgraduate study to starting a family.

We cannot build a confident, dynamic economy on graduates’ unrest—once quiet, but now hard to ignore. We cannot speak of opportunity while allowing aspiration to accumulate compound interest. We say that those with the broadest shoulders must bear the greatest burden, so let us ensure that that principle applies here. Graduates are not asking for special treatment; they are asking for fairness and consistency. This House should listen and act now.

[Several hon. Members rose—]

[Emma Lewell (in the Chair)]

Order. As Members can see, this is a very popular debate, so there will be a two-minute limit on all Back-Bench contributions.

09:48

[Josh Babarinde (Eastbourne) (LD)]

I thank the hon. Member for Ilford South (Jas Athwal) for securing the debate. The current student loans regime has transformed halls of residence into a student “Hotel California”, where folks can check out—they can graduate—but can never leave. They can pay exactly what is asked of them month on month, yet end up with a total bill that gets bigger year on year.

It was the prospect of a greater bill burden that fired me up, as a student in 2010, to stand in Parliament Square and oppose some of the changes that were coming through, but the effect of those reforms has been compounded by two key changes on the watches of subsequent Governments. The first is the Conservatives’ unilateral removal of maintenance grants, which forced students to borrow even more to live. Indeed, the proportion of students taking out only a tuition fee loan, and no maintenance loan, is the highest in a decade. That means either that the student population is now skewed towards those who are more privileged, which calls into question its inclusion, or that less well-off students are going without the maintenance support that they need and deserve. Either outcome would be a shameful reality.

The second key change, which the hon. Member for Ilford South highlighted, is the freezing of the repayment threshold—a student stealth tax that will make it even more difficult for students to live going forward. That is why I call on the Government to revisit the freezing of the threshold and to reinstate maintenance grants for students.

09:51

[Helen Hayes (Dulwich and West Norwood) (Lab)]

It is a pleasure to see you in the Chair today, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for his powerful opening speech and for securing the debate. I declare an interest as a mum of two students who are currently in higher education.

I want to acknowledge the strength of feeling among graduates with plan 2 loans and the material impact that current loan terms and the planned freeze in the repayment threshold are having on them. The generation of graduates with plan 2 loans studied between September 2012 and July 2023. They are the same generation who have found themselves increasingly locked out of the housing market, unable to put down roots in their community, and squeezed by the cost of living and the cost of renting in particular. Plan 2 loans add unfairly to those cost pressures.

If the promise of education is that if you work hard, do well and get a good degree, then that degree will be a passport to increased earnings and a good standard of living, that promise is not being fulfilled for far too many in the plan 2 generation. I believe there is an urgent need to look at the value for money of student loans. We need to do that for the plan 2 generation, but also for the generation of young people who are considering university. We need to recognise that students from the lowest-income backgrounds are most likely to be deterred by the perception that university is not good value for money because of the impact of the loans.

I share concerns about unilateral changes in payment terms; that does not meet the standard of fairness that we would expect from any other lender. I share concerns that loans are linked to a measure of inflation that the Government do not use as the basis for other calculations.

However, in short, the solutions are not straightforward. The Education Committee is currently undertaking work on the funding of higher education institutions, and its headline conclusion is that they are very fragile. The proposals made by the Leader of the Opposition this week are entirely untenable, and I reject in particular her war on arts degrees, which will always have an important place in our education landscape.

09:53

[Aphra Brandreth (Chester South and Eddisbury) (Con)]

It is a pleasure to serve under your chairship, Ms Lewell. I declare an interest: I have two children at university who both have student loans.

I am proud to represent part of the city of Chester, home to the University of Chester, which is a fantastic asset to our city and region. Young people are today’s innovators and tomorrow’s entrepreneurs—our future high-skilled workforce, our teachers, doctors and nurses—and the foundations that we set today, and the start that we give them, are an investment in the future of our country and economy. That is why the student finance system matters so much.

Many young people in Chester South and Eddisbury are struggling under the weight of student finance. I cannot go into all the emails I have received, but one young constituent from a low-income family told me that she had no choice but to take out a loan to pursue her dream of working in education. She does not expect to clear that loan in her lifetime, and she says that because of the threshold freeze, she will simply pay more each month without ever making a meaningful dent in it.

By freezing the plan 2 repayment threshold until 2027, the Chancellor has chosen to increase the burden on young graduates at a time when the economic odds are already stacked against them. That is why we need a new deal for young people, as the Conservatives have set out: reducing interest rates on plan 2 loans so that balances never rise faster than RPI, ensuring that students and taxpayers are not burdened by low-value courses, and increasing apprenticeship funding to expand high-quality vocational routes, such as those offered at the excellent Reaseheath college in my constituency. If we are serious about growth, opportunity and intergenerational fairness, we must ensure that the system designed to invest in young people does not instead hold them back.

09:59

[Kate Osborne (Jarrow and Gateshead East) (Lab)]

It is an honour to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this important debate.

The debate is timely, as I have recently been working on a case for my constituent Melissa, who has come to Parliament today to hear the debate. When I posted on social media about Melissa’s case, with her permission, it caught a wave of people in similar situations. I have now been contacted by more than 700 individuals, all with similar horror stories about the level of debt they have on plan 2.

Melissa left university with a debt of £37,000 and has been paying off her loan every month since 2022, yet despite four years of payments, the amount she owes has increased by tens of thousands, to £60,000. Melissa’s case is by no means the worst example that I have received. Another constituent, Lucy, left university with nearly £28,000 to pay back, and her debt now stands at a huge £54,000. Chloe—one of our brightest science, technology, engineering and maths students—attended Newcastle University to study physics, and then went straight into full-time employment, starting to pay off her student loans immediately. Despite that, the amount she owes has increased by £14,000.

Education is a right, not a privilege. It is not okay that we are pricing people out of education. Quite frankly, the amount of interest being charged every year is a scandal and a rip-off. What will the Government do to help to eliminate student debt? Considering the thresholds is all very well, but I think we should just abolish tuition fees altogether, to boost social mobility and benefit society.

09:59

[Jim Shannon (Strangford) (DUP)]

It is a real pleasure to serve under your chairship, Ms Lewell. I thank the hon. Member for Ilford South (Jas Athwal) for setting the scene. Two minutes—my goodness! How can I get everything into two minutes?

I think of the many graduates who work at Asda— a job they land because there are no full-time entry-level graduate jobs for them. I am aware that student loan repayments are not done in the same way in Northern Ireland as in the rest of the United Kingdom; Northern Ireland borrowers primarily use plan 1, whereas England has a different system. However, cost of living difficulties mean that borrowers find themselves with problems even if they have what once would have been classified as good jobs.

Because of the time limit, I will give only one example: a junior doctor who, despite getting all As at GCSE and A-level, could not get into Queen’s medical school in Belfast, but was accepted by Edinburgh medical school. That meant a compulsory additional degree within the degree, and an extra year. This clever young lady is now home and working in the trust, and she sent me a copy of her payslip, showing her crippling student loan repayment. She also sent me a copy of her student loan debt—and my breath left my body. This year, she will finish her foundation year 2, and she is not guaranteed a position, so she takes all the on-call hours and locum hours and lives her life worried about her patients and about her debt. She is 25 years of age, living in her sister’s spare room, working 70 hours a week, with a debt of £100,000. Something is wrong with this system. I ask the Minister to consider that.

Our student fees are £4,500, plus maintenance. We need to look at this system. It penalises home students and forces young people to leave their local areas for places that do not have free student accommodation, where they have to pay for someone else’s mortgage over the next 26 years of their lives while paying their own mortgage. No working person should begin their financial journey mired in debt because their local university could not take them and they had to move to a new part of the country and pay for life there. We can do better than that. I look to the Minister to make sure that he does.

[Several hon. Members rose—]

[Emma Lewell (in the Chair)]

Order. I am going to have to reduce the time limit to one and a half minutes.

09:59

[Abtisam Mohamed (Sheffield Central) (Lab)]

I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing the debate, which at its core is about fairness. In my Sheffield Central constituency, which is home to two major universities, I regularly meet with students and graduates, whether in surgeries or through meetings with student officers. One core theme that they have relayed to me is that they feel anxious and frustrated, and they rightly ask why the system is stacked against them.

I will read a few examples that constituents have given me. One said:

“I started university in 2012 and since graduating have had a salary of between £30,000-£40,000 for much of that time. Despite this, since graduating my loan has increased from ~£45,000 to nearly £80,000”.

Another said:

“I borrowed £76,829. I repay £3,700 every year. But my interest rises by £7,000. Paying it off within 30 years is impossible. It makes me wish I hadn’t gone.”

When education makes young people regret participation, something is profoundly wrong.

We are told that the system is progressive because repayments are income contingent, but if we look closer, higher earners clear their debt quickly, escape decades of interest and move on. The thought of such staggering debt will likely put off working-class students from going to university. That is not progressive; it is regressive, and it will entrench inequality rather than reduce it. I say to the Minister: we must cap interest on all student loans at CPI and restore fair repayment thresholds.

10:00

[Olly Glover (Didcot and Wantage) (LD)]

It is a pleasure to serve under your chairship, Ms Lewell. I thank the hon. Member for Ilford South (Jas Athwal) for introducing this debate.

I would like to use my limited time to tell the stories of two of my constituents. One of them is Rebecca, a health worker who is an NHS band 6 employee. For those unfamiliar with NHS pay bands, as I am, that is between £38,600 and £46,600 a year. She has raised concerns about the impact that her student loan repayments are having on her finances and day-to-day life. She says:

“It feels like a lifelong debt that’s impossible to reduce…Looking at the bigger picture is even more frustrating. Between 2019 and 2025, almost £18,000 in interest has been added to my loan, despite the fact that I’ve been working and making repayments the entire time. It feels like I’m being penalised for staying in steady employment rather than making real progress on the debt…I worry that this system will discourage people from training for essential professions like healthcare.”

Another constituent, Alexandra, works at Culham Campus, a site for fusion energy research and many other industries. She says that,

“completing a PhD was absolutely necessary to pursue my career in essential scientific research…As they stand, those who choose to embark on a PhD are disadvantaged further by committing to 3-6 years of time in which they will be unable to pay off student loans due to PhD stipends falling under the repayment limit, I am likely to pay significantly more towards my student loan than was originally billed before it is written off purely because as an undergraduate I came from a low income family and I received the full subsistence and fee loans.”

10:02

[Jessica Toale (Bournemouth West) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Lewell. I pay tribute to my hon. Friend the Member for Ilford South (Jas Athwal) for securing this important debate.

We have a fundamental question to answer: is our higher education system set up to give young people, regardless of background, a fair chance? In a constituency such as Bournemouth West, part of an area with three universities and tens of thousands of students, I have seen at first hand how multiple changes to higher education funding consistently fall on students from low-income backgrounds—constraining them not by ability but by financial anxiety.

We know that plan 2 loans have interest rates that mean balances balloon, and some students will never pay them back, and that graduates feel that they were mis-sold, but we have not yet discussed the impact that this is having on the job market. It is distorting behaviour, with graduate applicants asking for salaries below the repayment threshold to not trigger deductions. That is not how we should be shaping an ambitious economy in the modern world.

In letters and emails from students, they ask for three things: that there be no further real-terms freezes to the repayment threshold, that interest rates be linked to CPI, and that there be a more progressive pay structure. Young people are calling for a fair and predictable settlement that reflects the contribution that they will make to our economy and society for decades to come. The least we can offer them is that clarity.

If we truly believe that every young person, regardless of background, should be able to pursue higher education, we need to build financial architecture that does not undermine but supports that ambition.

10:03

[Liz Jarvis (Eastleigh) (LD)]

I have heard from many young constituents who are frankly pretty despondent right now. They have endured a global pandemic. They are grappling with the cost of living crisis, a housing crisis and difficulties in securing entry-level jobs. On top of that, they carry the incredible burden of large student loans, made ever larger by high interest rates and a frozen repayment threshold, leaving many feeling they will never be free of it. We need to acknowledge that an entire generation of graduates on plan 2 student loans have essentially been mis-sold their loans. One constituent told me about their son who, despite repaying his loan for five years, has seen his balance increased by 33%. How can that possibly be justified?

The cumulative impact of successive changes to the terms and conditions of student loans in England has fundamentally undermined confidence in the system. The threshold has been moved around haphazardly by successive Governments, being regularly frozen, including by the current Government. Many students were told that this was manageable debt, but in reality it has developed into something totally different from the graduate contribution system it was intended to be. The repayment threshold was supposed to rise with earnings. The previous Conservative Government’s decision to freeze it was a needless move to take money away from graduates. It is a stealth tax.

According to the money-saving expert Martin Lewis, the most direct thing that would help all students would be not to freeze the repayment threshold. Will the Minister look at that as a matter of urgency? Student loans also impact the ability to get a mortgage because they are used for affordability calculations. There must be an immediate reversal of the repayment threshold freeze, and RPI should no longer be used to calculate interest.

10:05

[Juliet Campbell (Broxtowe) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this debate.

The University of Nottingham is on my doorstep, so many graduates who make their home in Beeston and Bramcote in my constituency. One of my constituents said:

“My salary is never going to go up at the same rate as the interest, you have to pay back huge amounts every month to match the interest being charged.”

Another said that they took out a loan of £37,000 and yet,

“since graduating 8 years ago, I have paid back just £600 and accrued £18,000 in interest. Because until a year ago, my salary did not meet the repayment threshold. This means that I currently owe £55,000. Bearing in mind, I have been working the whole time since graduating.”

She said to me, “It is ludicrous,” and I agree.

Students should never end up in a position where their monthly repayments are significantly less than the interest they accrue. The inequalities in the system are stark. Borrowers only repay student loans while they are earning, but the interest will accrue nevertheless. That puts an unfair penalty on those who work part time, take breaks for maternity or are carers. The message from my constituents in Broxtowe is loud and clear: “This simply isn’t fair.” I call upon the Government to make urgent reforms.

10:07

[Sammy Wilson (East Antrim) (DUP)]

At the start of this debate, there was a bit of to-ing and fro-ing as to who is to blame for this problem—was it the Conservatives, or the Conservative-Lib Dem coalition? I do not think that is the point. The point is that there is a problem, and we now have a Government who have the ability to deal with it.

The second point—this word has been used time and again in this debate—is about whether the system is “fair”. I know the Chancellor believes that the arrangements in place are reasonable and fair, and I think that is wrong. It is not fair that people take out loans and then find that the terms of those loans are changed. It is not fair that, as people earn more money, the terms of the loans are changed. No building society would charge someone more for their mortgage if they got a bit richer; they enter into an agreement and the terms are there. The third point is that it is not fair that, in some cases, because of the freezing of thresholds, many people who are on low incomes are now dragged into the system of repayment, and pay up to 9%.

A number of things have been suggested. The first is that thresholds should not be frozen, but should increase with inflation. The second is that interest rates should be clear and linked to CPI. The third is that repayment should be set at a reasonable level of 5%—

[Emma Lewell (in the Chair)]

Order.

10:08

[Justin Madders (Ellesmere Port and Bromborough) (Lab)]

It is a pleasure to see you in the Chair, Ms Lewell. I declare an interest: I have three sons who have huge debts from their time in education. I would be surprised if more than one of them pays off their debt in full, but that would be in line with the roughly one third of all students who fully repay their loans. Does that not tell us on its own that the system is not working? Would any bank be in business if only one third of its customers repaid their loans? We have a system of loans that most people will not be able to repay. Should that not tell us something about the balance not being right?

I want to make a broader point about how we can also improve the system for the benefit of the whole country. We should consider whether those who serve our public services should have their loans repaid by the state while they continue in the service of it. After all, if the justification for repayment of loans is that the individual has benefited financially from their university education, should there not also be an argument that if the state is benefiting from that individual’s education by the service they provide, the state should also bear some responsibility for the repayment? I appreciate that that would be a significant rewiring of the system, but I have no doubt that it would help with recruitment and retention, particularly in the NHS. It may even stem the tide of doctors and nurses leaving these shores to work elsewhere, and it would be a way for us to say, “As a thank you for your public service, we will help repay the loans.”

Of course, as we have heard, the immediate challenge is to end the retrospective moving of the goalposts and the punitive interest rates for people who, do not forget, are trying to save for a home, start a family or even save for retirement. Under this system, that is impossible.

10:10

[Mark Sewards (Leeds South West and Morley) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. Fundamentally, I think it is right that graduates contribute to their education. I did so via a plan 1 loan and a subsequent postgraduate loan, too. For all its faults, that system ensured that universities could accommodate record numbers of people like me, who were the first in their family to go to university. But we are now at a point where people who pay an additional 9% of their income above a certain threshold question why the amount seems to only ever increase. The introduction of plan 2 loans and the trebling of tuition fees to £9,000 created a system where those who had to rely on it were essentially paying a graduate tax in all but name, while those who could afford to pay the tuition fees up front were able to avoid that burden altogether.

At the time that the loans were introduced, I argued that a graduate tax would be a much more progressive way of funding university: it would resolve that inherent unfairness of a graduate tax for some but not for all. However, the transition to such a system now would be costly and difficult, and would do nothing for those graduates who now have record amounts of debt. That is why the time is right to have the conversation about debt, interest, repayment thresholds and loan terms. Although tinkering with those things is definitely easier than wholesale replacement, they all come with costs, which have to be part of any conversation. I ask the Minister to seriously consider that now is the time for a genuine, thorough discussion in Government about the need to support graduates in such a position.

10:11

[Bell Ribeiro-Addy (Clapham and Brixton Hill) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for introducing this crucial debate. I want to start by saying, on the record, that I do not agree with tuition fees, and I do not support the decision to raise them. If there is still an MP in this House who voted to bring in tuition fees in the first place, they should be deeply ashamed of themselves for pulling up the drawbridge behind them.

As someone whose entire undergraduate degree cost less than what a current student can expect to pay for a year, it is only right that I advocate for current and future students. Like so many, I have had a number of constituents on plan 2 student loans contact me to say that they have been working ever since they left university, and have consistently made payments to their loan, yet they have not once seen their total loan decrease; in fact, they have increased by substantial amounts. That is happening to so many young people. Many of us have staff in that situation.

Some are calling it a graduate tax, and others are even using that phrase to assert the fairness of this loan system, but that is, frankly, an insult to graduates who are already paying taxes on their income. The terms of the plan 2 student loan make it more comparable to something that a loan shark would offer. It is not a graduate tax, and it is just not fair. As for the decision to freeze the repayment threshold, it is a one-sided breach of contractual terms. We need a more equitable approach to higher education funding overall.

10:13

[Peter Prinsley (Bury St Edmunds and Stowmarket) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for introducing the debate. This is an issue of intergenerational inequality, of which we should all be ashamed. My university cohort and I graduated without debt. We entered a housing market that was accessible and over time we accumulated assets, property, pensions, savings and security. I served 40 years in the NHS, until that was interrupted by an astonishing election result. Now, the landscape has changed. I see the difference in my own family. My two older children studied under plan 1; their repayment terms were short and less onerous. My youngest fell under plan 2 and she has a huge debt, which is growing despite the fact that she is paying it off.

This debate is about aspiration, which, as my hon. Friend said, simply cannot compete with compound interest. It is about whether young people begin adult life with opportunity, or decades of liability. Let us sort this out. Let us increase the repayment thresholds, ensure that interest does not outpace realistic repayment capacity, explore tax-deductible repayments similar to pensions, and improve transparency so that students fully understand what they are signing up for. Education should expand opportunity, not entrench intergenerational unfairness. That is a reality we must confront, and a duty we must uphold, as we deal with this utterly iniquitous system.

10:14

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

It is a pleasure, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this debate. I was a beneficiary of free higher education under Harold Wilson and Jim Callaghan, but I must begin with the stark reality that today’s graduates face. The average debt on graduation in England is around £53,000, and many leave owing £70,000, £80,000 or even £100,000, with postgraduate borrowing included. That is a mortgage-sized burden placed on young adults before they have saved a deposit, started a family or built financial security, and even before repayment thresholds and interest are factored in.

We were warned: plan 2 and plan 5 are not just loans, but lifetime surcharges, and that is because of cumulative political choices: the introduction of fees in 1998, variable fees in 2004, the loan book sale, the high-fee and high-interest plan 2, and now plan 5’s lower thresholds. Higher education is a public good, yet we have built a system that assumes that every degree guarantees high earnings and prices them accordingly, despite the fact that many do not enjoy those earnings. We must rethink, and be honest that a system built over 28 years is now failing.

10:16

[Sarah Russell (Congleton) (Lab)]

I am pleased to see you in the Chair, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this debate.

The system just is not fair; it does not make any sense and it does not set people up well for life. Realistically, a person makes a decision about whether to go to university when they are about 16 or 17 years old. We would not let banks lend money to 16 and 17-year-olds on these terms—we would think it wrong; people cannot enter into those contracts until they are 18—but when someone makes the decision to apply to university, unless they are from a very wealthy background, they are essentially signing up to a huge amount of ongoing debt.

Young people quite rightly aspire to own homes, start families and have the same sort of life and pension savings that the generations before them had, and I do not see how that is unreasonable. Yet we are allowing a system to persist in which many of them are paying 9% of their income, on top of the tax they already pay, spiralling house prices and the incredibly high requirements for childcare, if they wish to have a family. Of course, Labour has rightly helped with many of those problems, but the student loans system remains a barrier to opportunity.

We should have great aspirations for our young people. Education is a right, and should not be a privilege, but those privileged enough to have parents who can pay for their fees up front have a massive benefit over everyone else. That is wrong and it needs to change.

10:17

[Tim Roca (Macclesfield) (Lab)]

It is an uncomfortable truth that England now has the most expensive public university system in the world. The Institute for Fiscal Studies has told us that, while the taxpayer underwrites 45% of its cost, students and graduates cover 55%, which represents a profound shift in how we fund higher education in this country. A formative moment for me and for many others was watching the Liberal Democrats entering into coalition with the Conservatives in 2010 and not abolishing tuition fees, but in fact trebling them. We were told that that was progressive, but to a generation of young people, it felt like a gross betrayal.

It is fair to say that graduates have a graduate premium, with earnings potentially a third higher than for non-graduates, but averages conceal as much as they reveal. The IFS has shown that those in the middle earnings distribution repay the highest share of their lifetime earnings. As hon. Members have said, many people have no prospect of paying off their loans at all. That is not a progressive system, particularly when we are asking them to think about saving for a home, starting a family and contributing to society.

We need to think about the public good that higher education is, and the fantastic contribution that graduates make to our society and economy. We need to look again at the structure and the thresholds, particularly the threshold freezes, and ask whether those in the middle are carrying too much of the burden and whether the balance between the contributions of the taxpayer and of the graduate has drifted too far.

10:19

[Alison Taylor (Paisley and Renfrewshire North) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. I commend my hon. Friend the Member for Ilford South (Jas Athwal) for raising such an important debate. I declare an interest as the mother of a daughter who still has a student loan.

I was the first in my family, male or female, to go to university, and when I went, it was an opportunity confined to just one in 20 young people. Today, that number is more like one in two. The design of the loans and repayment plans are the creation of the previous Government, and is one of many legacy issues that have been left for this Government to clean up. Students who are alarmed at having made payments and yet finding themselves even further in debt, are victims of the Conservative’s appalling management of the economy, which led to a RPI well above 12% in 2022. Opposition claims that they would now cap rates ring hollow, given they did little about them when they were in power.

As this Government get the economy and inflation under control, the interest rate will come down. It is right that the Government keep the impact of loans on students and young people under review. Students should not feel the burden of their families’ financial position. Wealth inequalities in society should not lead to inequalities of outcomes for students.

10:20

[Kevin Bonavia (Stevenage) (Lab)]

It is a pleasure to see you in the Chair, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing the debate.

Young people who work hard, gain qualifications and enter the workforce deserve a system that supports their ability to build secure and fulfilling lives. One constituent recently told me about the impact of the system on his family’s future. He is a young, working professional raising a daughter with his wife, and they are doing everything they can to provide security and opportunity for her. This year alone he has paid £852 towards his loan, but during the same period more than £2,300 of interest was added—nearly three times what he managed to pay down. He began university nearly a decade ago and the balance at the start of his repayment was £54,683. Today, despite working and making regular loan repayments, that balance has grown to £76,040—an almost 40% rise over the last 10 years. For a young parent trying to build a stable foundation for their child, the situation feels like running up a down escalator: always working hard, but never getting closer to the top.

Will the Minister think not just about incremental changes to the system, but fundamental, broad reform? That could include a graduate tax and, as the hon. Member for Macclesfield (Tim Roca) said, thinking about a balance between the taxpayer and the graduate repayments. I know the Minister will think about those carefully and I look forward to hearing his response.

10:22

[Rebecca Long Bailey (Salford) (Lab)]

I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing the debate. One Salford graduate who borrowed just over £41,000 graduated in 2018 owing more than £47,000 because interest had accrued while they were still studying. After eight years of repayments and nearly £20,000 paid back, their balance is now significantly higher than it was when they graduated.

Another graduate told me they owed £59,000 in 2020; that has now increased to more than £75,000, despite steady monthly repayments. That is not how people understand a loan to function and many borrowers were never properly warned that Governments could retrospectively alter key repayment terms.

The requests from campaigners are reasonable: reverse the repayment threshold freeze, tackle the unfair interest rate metrics and protect against retrospective changes. Those are not radical requests; they restore trust. We must understand that the marketisation of higher education has failed. We must reform the loans system, but we must ensure that our ultimate goal is more ambitious. We should abolish tuition fees and replace them with a sustainable, publicly funded model for higher education and university research, providing long-term stability for institutions and genuine opportunities for students, regardless of background.

10:23

[Natasha Irons (Croydon East) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing the debate.

The system that the current Government have inherited, after years of failure on the issue by the previous Government, is complex, ineffective and simply unfair. What was supposed to be a system that enabled fair contributions to the cost of higher education has become a long-term financial burden that is quietly eroding living standards. Freezing the repayment threshold for plan 2 borrowers has quietly increased the real cost of payments year after year, pulling more people into making repayments and extending the burden far beyond what was expected.

Changing the terms of a repayment after a contract has been agreed is fundamentally wrong. Using RPI as the measure to calculate interest—a measure the OBR says should be discouraged, as it is not a good measure of inflation—is completely wrong. Linking rates to CPI rather than RPI and removing the additional 3% margin could restore credibility and better reflect economic reality. Student loans were supposed to be an income-contingent contribution towards higher education, not a perpetual liability. Today’s graduates are being asked to accept not only a system that we did not face ourselves, but one in which the terms can be changed after they have been signed up to.

This debate is not about walking away from supporting our universities. It is about building a country where talent thrives and choosing to become a nurse or a teacher is not quietly penalised by decades of repayments. It is about restoring balance. It is about designing a system that is progressive and sustainable—one that protects universities, supports students and reflects our values as a country. It is about fairness.

10:25

[Tom Rutland (East Worthing and Shoreham) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Lewell. I want to thank my constituents Matthew, Courtenay, Frances, Giovanni and Veronica, who have contacted me recently about this, and parents such as Joanne who are worried about generational inequality.

There are, to my mind, two problems with the plan 2 loan system. The first is psychological. It is incredibly depressing for people to see the amount that they owe continually increasing, despite making payments that can constitute hundreds of pounds each month. The second, more important one is financial. Under plan 1, as my earnings grew, I was making increasingly large monthly payments towards my student loan, but I knew that this was a temporary situation and I would eventually be debt-free. For those on plan 2 loans, it is not anything like so temporary, primarily due to the size of the principal and the higher rate of interest it attracts.

That has a real impact, because the economic circumstances students are graduating into today are a world apart from those of their predecessors, who enjoyed free higher education. Today’s graduates face higher housing costs and a reduced graduate wage premium compared with previous generations. Those factors combine with high monthly repayments to reduce disposable income and leave young workers in stasis, living at home with their parents or in shared rental accommodation, perhaps partnered and wanting to start a family but unable to afford to do so.

We have inherited this broken system, but we have the opportunity and responsibility to fix it, making changes to increase the monthly disposable income of graduates by raising the repayment threshold or staggering the percentage of income above the threshold that is repaid, and looking at the interest rate paid falling at a minimum to RPI or, ideally, to CPI, given that the Government are phasing out RPI.

10:25

[Catherine Atkinson (Derby North) (Lab)]

The ambition for two thirds of young people to benefit from higher level education, where it is an apprenticeship, technical or academic qualifications, is about ensuring that young people have opportunities. Of course we want a fair system of student finance, but the answer should not be taking away choices. The Conservative plans to cut 100,000 university places—to decide what students are and are not allowed to study—is wrong, and it is being proposed by many who benefited from going to university.

The coalition Government of Conservatives and Liberal Democrats tripled university fees and introduced plan 2 loans. I have been contacted by many graduates such as Adam, who told me he borrowed £37,500 and has repaid over £20,000, but because of interest now owes over £1,000 more than he borrowed in the first place. I am pleased that the Education Secretary has said she will look at these loans.

I am also pleased that, unlike the Conservatives, who made and dropped pledges on apprenticeships and presided over a reduction in their number by almost a third in the decade before the last election, this Government are investing £725 million to help deliver 50,000 more quality apprenticeships. For the most disadvantaged students who want to go to university, this Government are reintroducing maintenance grants, enabling opportunity and choice, not cutting them off and telling 100,000 students that they cannot have the choices that were open to us.

10:25

[James Naish (Rushcliffe) (Lab)]

I am so proud to have the University of Nottingham campus in my constituency. I believe that higher education in the UK is one of our greatest assets and also one of our greatest exports, and we must remember that, despite all the concerns about the student loan system.

The student loan system is not a good system. It is a complete mess, and it risks undermining public trust in these institutions. It will not surprise Members that I have been contacted by numerous graduates about this issue, who have made some fantastic points about not just interest rates but the impact on women, the impact on social mobility and the psychological impact.

I want to leave with the Minister the three questions most commonly asked in my inbox. First, how can successive Governments justify changing repayment thresholds and interest structures when individuals took out loans under materially different expectations? That does not happen with commercial loans. Secondly, if the majority of plan 2 borrowers are projected never to clear their balance, what is the policy rationale for maintaining interest rates above inflation or Government borrowing costs? Finally, what assessment has been made of the impact of current student loan terms on home ownership, pensions and having children, and how on earth does that impact align with our goals on economic growth?

10:29

[Daniel Francis (Bexleyheath and Crayford) (Lab)]

It is a pleasure to serve under your chairship, Ms Lewell.

As has been said, this is an issue of generational unfairness. My wife and I had plan 1 loans. At that stage, in our early 30s, having paid off our loan, we felt we could start career progression, work our way up the housing ladder and have a family. However, what I have seen in my postbag is correspondence from constituents across Bexleyheath and Crayford who do not feel that that is the case for them and feel that the system now works against them.

If we had time, I would read out the case studies of Jessica, James, Gurkamal and Stuart, and also the comments from parents, such as Adebimpe, Emma and Nicola, outlining the experiences of their children, whose loans are growing and who, unlike those of us who had plan 1 loans, are having to pay huge amounts in interest, rather than paying off the loan itself.

I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this debate. I echo what he said about the key things that we need to hear from the Minister today: about the level of interest, the thresholds and how we can resolve the 9% repayment rates, and about how we can make the system closer to what I experienced and fairer for those studying today, those considering studying or those who have just been through the system.

10:31

[Ian Sollom (St Neots and Mid Cambridgeshire) (LD)]

It is a pleasure to serve with you in the chair today, Ms Lewell, and I congratulate the hon. Member for Ilford South (Jas Athwal) on securing this debate.

As we have heard, there are many graduates in this country who make loan payments every month and yet they see their loan balances grow. They are young professionals whose loan statements bear no resemblance to the deal they thought they were signing up to. At the same time, there are students who cannot afford to eat and university finances are precarious across the sector. The systems feel broken, so this debate really matters, and those listening deserve a clear diagnosis of what has gone wrong and a credible path forward. Let me try to give both.

When the plan 2 system was designed, graduates were promised something specific: that they would repay only when earning above a certain threshold, that the threshold would rise with earnings, and that whatever remained after 30 years would be written off—a mechanism to share the cost of higher education between the individual and the state. A higher interest rate for higher earners was a deliberate feature—a progressive measure. Those graduates earning the most would contribute more, to make the system sustainable for those who could not. For many graduates at the time, that deal, however imperfect, felt manageable.

However, there is a problem: successive Governments have treated those promises as suggestions. In 2016, the threshold was frozen when it was supposed to rise, not because the economy required that, but because it was a convenient way to extract more from graduates without the political difficulty of imposing a tax rise. The threshold jumped significantly in 2022, but it was then frozen again, then raised again. Now the Government have given in to the same temptation, budgeting to freeze it for three more years. What graduates have experienced is not a coherent system operating as originally designed, but a set of rules that keep getting rewritten by whoever needs to balance the books that year. That is a core injustice.

To that political failure, though, we must add an economic failure. In the early years of this decade, inflation ran at levels that few foresaw when the system was designed in 2012. RPI, the basis for the interest rate, exceeded 13%. There was a cap on interest rates during that period, which in principle was welcome, but it was implemented too late, and the cap was set too high to make a meaningful difference for most borrowers. Meanwhile, graduates’ starting salaries barely moved in real terms. Interest-linked to a discredited inflation measure running hot, while earnings stood still—that combination has been toxic and the system had no mechanism to correct it.

Although plan 2 graduates suffered from the accumulation of damage caused by those political and economic circumstances, the last Government introduced plan 5. Plan 5 graduates face a lower repayment threshold and a 40-year repayment period before write-off—terms that in many respects are harder than those faced by their predecessors. I hope we do not lose sight of the plan 2 or plan 5 cohort in this debate, because any serious reform of the system must address both.

Before I move on to what can be done about loan repayments, I want to say something briefly about students who are struggling right now. The abolition of maintenance grants after the coalition ended in 2015 loaded the highest debt on to the students least able to bear it. Those from the poorest backgrounds now graduate with significantly more debt, not from their fees but from the additional maintenance borrowing. The level of support has fallen 10% in real terms from its peak. Students skip meals, work hours that damage their studies, and are unable to participate fully in the education that they are notionally receiving. The Government have reintroduced £1,000 grants for maintenance for certain subjects, but the full reintroduction of meaningful maintenance grants for the most disadvantaged students must be a priority.

The most urgent action on repayments requires no review, but a decision: reverse the threshold freeze over the next three years and tie it to earnings, as graduates were originally promised. I hope the Minister can give graduates that commitment today.

For the structural reform that the system genuinely needs, we need to go beyond any single parameter. We need to design interest and repayment structures that are genuinely progressive across the income distribution, including by ditching the discredited link to RPI. We must build a system that also works for people studying flexibly and later in life, not just for 18-year-olds on three or four-year degrees. We are seeing more move to modular courses, so the system needs to be able to cater for that.

Structural reform is needed, which is why the Liberal Democrats are calling for a cross-party royal commission on graduate finance reform. I anticipate that some will see that as a delay, but I do not think it is. We need action on the threshold action now, but the commission needs to address a different, harder question: how do we build a system that future Governments cannot quietly dismantle the moment that fiscal pressure mounts? Every change made retrospectively to the terms has broken a promise to people who made life decisions based on them. Cross-party consensus with independent oversight of key parameters is the only protection against that happening again.

I would like to directly address the suggestion made explicitly by the official Opposition that the answer to fiscal pressure in the student finance system is to have drastically fewer students, and to cut courses, close departments and focus support on degrees whose graduates earn enough to repay quickly. That gets the diagnosis backwards. The graduate earnings premium has declined in Britian, not because we have too many graduates but because we have too few skilled jobs. Many of our peers in the OECD have expanded graduate numbers while maintaining or even raising the earnings premium. We should be asking why those countries have generated skilled professional jobs in a way that Britain has failed to do.

Cutting student numbers accepts that failure as permanent, but that is a counsel of despair. It also fails on its own terms. Setting aside the inherent value of the creative arts—many have made that point—that sector contributes enormously to the economy and enriches all our lives. Arts and humanities courses are also cheaper to deliver, and help to support expensive, lab-based science, technology, engineering and mathematics provision. Cutting 100,000 arts places would not simply reduce the loan book; it would undermine the financial model of the very STEM courses that the Conservatives claim to prioritise.

[Mr Charters]

Before the hon. Gentleman concludes, does he agree that the architects of plan 2 need to say one simple word—sorry?

[Ian Sollom]

I am not personally an architect of plan 2, but the former leader of my party did say sorry, and my party was appropriately punished at the 2015 general election.

The decline in the graduate earnings premium is, at its root, a story about economic underperformance, and that points towards the solution. Universities are not simply places that people go to acquire qualifications; they are also research engines, regional anchors, training grounds for public services and drivers of the innovation that creates the skilled employment that graduates need. The answer to graduates being squeezed is not fewer graduates; it is more skilled jobs generated by the research, commercialisation and civic investment that universities are well positioned to deliver. We face a choice: managed decline, fewer students, fewer courses, talent lost and regions left behind; or transformation—treating universities like the national assets that they are. Graduates and the country deserve better. I hope that the Minister can signal in his response that the Government are making a start on that.

10:40

[Jack Rankin (Windsor) (Con)]

It is a pleasure to serve under your chairmanship, Ms Lewell. I thank the hon. Member for Ilford South (Jas Athwal) for securing this important debate and highlighting one of the major challenges facing many young people in this country today: student loan repayments. Despite my youthful looks, I can clarify that I am on the last year of plan 1 loans, so this issue does not directly affect me. I have many contemporaries in that situation, though, and I think I understand it well.

When growing numbers of graduates are leaving university with mountains of debt and graduate recruitment is at a record low, there is an urgent need to address a system that is failing graduates. The hon. Member for Ilford South asked for broad agreement on that point. Although I did not agree with everything in his remarks, I think he has broad support across the House that the system as currently designed is not working. This issue affects a huge proportion of young people, given that over 50% of them now go to university. Combine that with a 30-year lifespan, and it becomes a generational problem.

Perhaps by coincidence, rather than design, this debate coincides with the announcement made by His Majesty’s most loyal Opposition of a new deal for young people. I acknowledge that it is partly responsive, but it has helped to bring the issue to the top of the news agenda. This debate could not be timelier. For young people, particularly those on plan 2 loans, there is not a moment to lose.

[Sarah Russell]

The hon. Gentleman has referred to plan 2 loans but plan 3 loans were also brought in by his Government. Plan 3 loans are for those with postgraduate qualifications—people who are definitely making an economic contribution to our society—and now kick in from when they earn £21,000. Does he agree that that was the wrong thing for his Government to do?

[Jack Rankin]

I do not want to talk about each plan individually, but this does need to be looked at in the round, as the hon. Lady is quite right to say.

Returning to the hon. Member for Ilford South, I am glad that he recognised—which some of his colleagues did not—that the beneficiaries of student loans should be asked to contribute. He called for fairness. I agree with him that, as it stands, the balance is not quite right. To my mind—the hon. Member for York Outer (Mr Charters) spoke to this—the main issue that we have seen is the breach of the promise on thresholds being frozen and on interest rates being increased. I acknowledge that we did that in government, but it has happened most recently in the recent Budgets. That is morally indefensible.

The hon. Members for Leeds East (Richard Burgon) and for York Central (Rachael Maskell), who I do not think are in their places anymore, made similar contributions from a left-wing point of view. I gently suggest that the mechanisms for mass debt cancellations, or even more, what they call “progressive taxation”, is not where we need to be. I am afraid I consider that to be the politics of the magic money tree. When we look at what is happening, one of the things that graduates are upset about is the unreasonable marginal rates of tax that they face as graduates when the student loan is included. More so-called “progressive” marginal rates of income tax would be part of the problem, not part of the solution.

I am aware that many a Conservative ex-Minister has stood at the shadow Dispatch Box and criticised the Government for things they themselves were doing in the recent past, so I say this with some self-awareness, but I say to the hon. Member for Eastbourne (Josh Babarinde) that the Liberal Democrats have to be careful on this issue—the faces on the Government Benches when the Liberal Democrats made some of their remarks were quite the picture.

The hon. Member for Dulwich and West Norwood (Helen Hayes), who I believe is the Chair of the Education Committee, made a fair point about the balance in education between economic outcomes and the broader social good of education. I agree with her that the case for education is broader than just economic, but I suggest that there is a balance. We have to be careful about whether it is progressive to send working-class children on university courses that will laden them with debt, but not provide them with the economic outcomes that they might need. There is a balance there to tread.

My hon. Friend the Member for Chester South and Eddisbury (Aphra Brandreth) talked about the nuance here, between the oppressive interest rates and the 30-year repayment threshold.

[Kevin Bonavia]

The hon. Member made the point about working-class people thinking about whether to go to university and be loaded with debt. Why should they have that worry when people who have far more family income do not have to make that choice?

[Jack Rankin]

I am not sure that I recognise that statement. At the risk of pointing out the obvious, I was not born in the parliamentary seat of Windsor. I grew up in Ashton-under-Lyne and was the kind of child the hon. Member probably has in mind. My passion at school was history but I did maths and physics at university. That was partly an economic choice that gave me opportunities that my parents and people I went to school with could not have dreamed of. That was a sensible decision I made for me and my family. Dismissing that as a relevant factor is not progressive.

[Natasha Irons]

Will the hon. Member give way?

[Jack Rankin]

I will, but I am aware of time.

[Natasha Irons]

On that point about making an economic choice, we are talking about the creative industries, which are worth hundreds of billions of pounds to our economy. Ensuring we have a diverse voice and qualified people in those jobs and having access to those skills is really important. I was a working-class child who ended up working at Channel 4 because of my degree. We should not ask working-class children to make those distinctions so early on in their careers; we should give them the opportunity to experience those careers as they move forward.

[Jack Rankin]

I agree, but would gently say that we want to ensure that people take the highest-quality creative courses imaginable, which we can honestly say will have economic benefits for them. That is the nuance and balance.

Because of the time, I will move on to my substantive remarks, though hon. Members having two minutes and 90 seconds to contribute does not do justice to the strength of feeling across the House. There is obviously broad unhappiness from those of all political colours and world views, and I wonder whether more time could be found to debate the matter on the Floor of the House.

The measures announced by the Chancellor in the autumn Budget are the most punitive yet for threshold and interest freezes. The freezing of repayment thresholds from April 2027 will cost the average graduate a further £300 a year by 2030, in an environment where rents are through the roof, job opportunities are few and the tax burden is at an all-time high. I gently say to the Minister that although we do have to balance the system so it is fiscally sustainable, this was done not to pay for education but to balance the books more broadly, which is unfair.

As I acknowledged earlier, it is unfair to change the rules post the fact for students who entered into the loan system in good faith when they were 18. Many graduates regard that as the behaviour of a loan shark rather than what they want to see from Government.

This week the Conservative party announced a new deal for young people, which rests on three pillars. The first is to reform the unfair student loans system. We would abolish real interest on plan 2 loans, ensuring that balances never rise faster than inflation. That responds to many of the criticisms in this debate.

The second pillar is more controversial. The fact is that university is not for everyone, nor should it be. One of the best ways to escape the debt pile is to avoid it. A university degree in today’s economy no longer guarantees work, sadly evidenced by the 700,000 graduates currently on benefits. That is why we would lift the funding cap for apprenticeships from 18 to 21-year-olds.

The third pillar is that we would make work pay through our new jobs bonus, where the first £5,000 of national insurance paid by any British citizen starting their first job would be placed in a personal savings account in their name. That money could go towards a deposit, starting a business or building a family.

Together with our plan to scrap stamp duty, that will help young people achieve home ownership and financial independence. Taken together, it represents the most ambitious policy package for young people in years and would re-enfranchise the lost generation. Fixing the voting system should be a priority for this Government. It is about fairness, repairing the intergenerational compact and ensuring that young people who play by the rules are rewarded for their aspiration and not taxed on it. I look forward to the Minister’s response.

10:49

[The Parliamentary Under-Secretary of State for Education (Josh MacAlister)]

It is a pleasure to serve under your chairship, Ms Lewell. I am grateful to my hon. Friend the Member for Ilford South (Jas Athwal) for securing today’s important debate on student loan repayments.

I would like to take a moment to collectively celebrate higher education and the transformational impact it can have for so many young people. We are right now in the peak UCAS application season. Although there are debates in this place about the merits and limitations of the current student finance system, I would not want any of these debates to put off those who have talents that university can accelerate and amplify. I acknowledge the interest shown in this debate on an issue that the Government will be looking at—I want to be clear about that up front. I recognise that many Members wanted to contribute, share personal stories and extend the arguments, but, because of time limits, we have not been able to hear the full breadth of the debate today. However, I doubt this will be the last time that Parliament considers this. The Minister for Skills in the other place, Baroness Smith, and I are alert to the issues.

I want to start by establishing some facts about the history of the plan 2 student loan system.

[Chris Hinchliff (North East Hertfordshire) (Lab)]

As a plan 2 graduate myself, before the Minister proceeds will he put on the record an acceptance that, with the misstep on the tuition fee repayment level, the cat is out of the bag? We need to deal with it in this Parliament. I urge him to reject the tedious, time-wasting suggestions from the Lib Dems and get on and deal with it with Labour values.

[Josh MacAlister]

I can confirm, as the Secretary of State for Education said earlier this week, this is an issue that we will, of course, look at. The plan 2 system was introduced in 2012 by the Conservatives and the Liberal Democrats in coalition. At the time, my party raised concerns about the design of that student loan package. When it was introduced, the threshold for repayment was only £21,000. Having said they would increase the threshold, the Conservatives and Liberal Democrats then froze it. They froze it in 2012, its first year; they froze it in 2013, in 2014 and in 2015: four years of Liberal Democrat and Conservative freezes to thresholds. The Conservatives then froze it in 2016. They froze it in 2017 and then again in 2021, 2022, 2023 and 2024. In total, there was a decade’s worth of freezes by parties who designed the model that they now stand here criticising. There is one phrase for that: crocodile tears.

[Helen Maguire (Epsom and Ewell) (LD)]

The Minister talks about the history of the student loan, and it is helpful for us all to understand that, but at the moment the students on plan 2 face a freeze—the very thing, along with previous Governments, that the Minister is criticising. It seems bizarre that he is criticising something on the one hand when he has taken action to do the same thing himself.

[Josh MacAlister]

That is a very timely intervention, because when we were elected we recognised the pressures and acted. In this Parliament, the Government are lifting the plan 2 repayment threshold to £29,385, ending a four-year freeze. We have acted to ensure that the threshold rises to above average graduate salaries, because that was the right thing to do, despite the fiscal pressures we faced. Due to the enormous pressures on budgets and the need for fairness across the education system, especially in further education, and to support the long-term sustainability of the student loan system, we announced at Budget 2025 that the Government will freeze plans for repayment thresholds at £29,385 for three years from April 2027. I note that, even with that freeze, a borrower earning £30,000 will repay around £4 a month and the average plan 2 borrower will repay about £8 more a month.

The freeze will generate £5.9 billion—money that this Government are investing back into young people. We are making improvements to the education system, and the threshold freeze contributes to that. The improvements are happening both in higher education and in the wider skills landscape. We will be investing £1.2 billion more in skills training per year by 2028-29, ensuring that we develop and nurture the skills that many young people who do not go to university need for the future. We are supporting colleges, apprenticeships and technical training, areas that have too long been neglected by other parties, with record funding. I see the benefits of much of that in my constituency, where many young people choose to pursue education through vocational and technical routes. We are setting up technical excellence colleges, ripping out the red tape from the apprenticeship system, and ensuring that more foundation apprenticeships get young people into trades and careers that give them a brighter future.

Politics is about choices. When a Government come in and all public services are in a mess, they have to work through their priorities. Just this week, we have announced generational changes to the special educational needs system. Just today, the Government are announcing major changes to ensure that people can see timely justice in the courts. We are also making changes to improve the student finance system. First, from January 2027, the lifelong learning entitlement will enable learners to use student loans more flexibly than ever before. Secondly, from the 2028-29 academic year, we will introduce targeted, means-tested grants, which, again, were scrapped by the previous Government. Thirdly, to support students from the most disadvantaged backgrounds, we are future-proofing our maintenance loan offer, with loans for living costs increasing in line with forecast inflation every academic year.

This Government recognise the strength of feeling on the student loan system, particularly plan 2, and we will always look at issues that are important to the public. We will continue to keep this system under review.

[Sarah Russell]

The Minister has spoken very well about plan 2, and we are grateful that he will be looking at it, but so far as I can tell, plan 3 thresholds have remained frozen for postgrads at £21,000 since their inception. That is deeply unjust. Will he commit to looking at plan 3 as well as plan 2?

[Josh MacAlister]

As the Secretary of State said earlier this week, we will look at these issues.

Across the board, we are acting as a Government to support people with the cost of living: investing in free childcare, freezing rail fares, cutting energy bills—there is welcome news on that today—and introducing measures on rights at work and protections for renters. We understand the pressures facing young professionals and young graduates. As the Secretary of State has made very clear, we will of course look at this system in the round and at how it can be improved. I thank hon. Members for their contributions to the debate.

10:59

[Jas Athwal]

I thank hon. Members for taking part in the debate. I will add just one point, which is that IFS calculations suggest that a graduate would need to earn £63,000 a year just to keep a £50,000 loan from growing. That is an astronomical figure just to stop the interest from growing. All I would say to the Minister is that being in government gives us the ability to fix what is wrong. The graduate loan system is not working, so my humble request is that we please fix it.

Question put and agreed to.

Resolved,

That this House has considered student loan repayment plans.