Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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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.
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.