Question to the Department for Education:

To ask the Secretary of State for Education, what assessment her Department has made of the potential impact of freezing repayment thresholds and interest rate arrangements for Plan 2 student loans from 2027 on (a) low and middle income graduates and (b) the wider financial circumstances of young adults; what assessment she has made of the implications of these changes for the Government’s policy objective of ensuring that the student finance system is fair for students, graduates and taxpayers; whether her Department has assessed the impact of applying changes to repayment terms to existing borrowers who entered into loan agreements under previous conditions; and whether she has considered the case for greater regulatory oversight of student loans, including by the Financial Conduct Authority.

Plan 2 loans were designed and implemented by the previous government and, given the inherited fiscal situation, we are making tough but necessary decisions.

It is important to consider this change in the round. We have increased the repayment threshold for Plan 2 loans to £28,470 in April 2025, its first increase since 2021, and increased it again on 6 April this year, to £29,385. Threshold freezes from 2027 have been introduced to protect taxpayers and students now, alongside future generations of learners and workers.

Student loan balances do not appear on borrower credit records, meaning the total size of the student loan debt is not considered in a borrower mortgage application.

Student loans have more favourable features compared with Financial Conduct Authority (FCA) regulated loans and cannot be regarded as comparable financial services to such loans. Unlike FCA-regulated products, key student loan terms are set out in regulations, and any changes would be subject to parliamentary scrutiny.

Student loan terms and conditions make clear that the conditions of the loan may change in line with the regulations that govern the loans. Students sign these terms and conditions before any money is paid to them.

The department has produced the attached analysis regarding the lifetime impact of freezing the repayment and interest thresholds.