Student Loan Repayment Plans

Liz Jarvis Excerpts

Wednesday 25th February 2026 Westminster Hall

[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.

--- Later in debate ---

[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.