Labour MPs criticize Britain’s regressive student loan system, intensifying calls for Sir Keir Starmer to overhaul the scheme that burdens graduates with massive debts. Young people voice outrage over spiraling costs from what they call unfair financial terms.
Chancellor’s Freeze Sparks Backlash
Campaigners label the chancellor a “loan shark” after the announcement of a three-year freeze on the repayment threshold. This change forces many borrowers to repay far more than they originally borrowed due to high interest rates.
Education Minister Bridget Phillipson pledges to review Plan 2 student loans but stops short of promising reforms amid rising cost concerns.
MPs Demand Urgent Overhaul
During a Westminster Hall debate, Ilford South Labour MP Jas Athwal declares the system “in urgent need of reform.” “The whole system needs to be reformed, and tinkering on the edges is not going to cut it anymore. A much fairer system is what we are looking for at the moment,” he states.
Athwal adds, “This whole system burdens millions with balances they may never clear. It follows the letter of the principle whilst violating its very spirit. Many believe Plan 2 loans and the system at large are predatory, regressive, kills graduates’ ambitions, and the spiralling interest is stressful for students.”
York Outer Labour MP Luke Charters, a Plan 2 graduate, calls it a “Frankenstein’s mess.” “It is an absolute dog’s dinner of a system,” he says.
Leeds East Labour MP Richard Burgon argues the system “breaks a whole generation” and urges debt cancellation. “As a society, it’s time for a serious discussion about cancelling student debt. That would provide immediate relief to young people; instead, we should fund our education through progressive taxation,” Burgon states.
Athwal requests ministers to “go away and have a real think about it,” though he avoids a full review in the debate.
Plan 2 Loans Explained
Plan 2 loans apply to students who started university in England and Wales from 2012 to 2023. Interest accrues at Retail Prices Index (RPI) inflation plus up to three percent, based on earnings.
Borrowers repay nine percent of income above the current threshold of £28,470 starting the April after graduation. Post-November budget, the threshold freezes at £29,385 from April 2026 for three years, rather than rising with inflation. It resumes RPI increases from April 2030.
Student Protests and Government Stance
In early February, the National Union of Students rallies in Westminster, demanding reversal of the threshold freeze.
The government maintains it inherited the system from the previous administration and introduced the freeze to safeguard taxpayers, current students, future learners, and workers.
