Student Loan Repayment Plans

Natasha Irons Excerpts

Wednesday 25th February 2026 Westminster Hall

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.