More than 120 MPs and peers have asked the chancellor to carry out an "urgent review" of the student loan repayment system. An open letter coordinated by the campaign group Rethink Repayment says the current set-up places an "unsustainable burden on the next generation of workers". Among the cross-party signatories are MPs with their own Plan 2 student loans, which have come under particular scrutiny this year.
Last week, Education Secretary Lucy Powell said the interest rate on those loans was "egregious" and the issue was at the top of her in-tray. Current and former students have different student loan plans depending on where they live in the UK and when they went to university. The letter to Chancellor John Healey does not specify a particular plan signatories would like to be reformed, nor does it name a particular nation.
However, the debate has centred around Plan 2 loans, which were taken out by students in England between September 2012 and July 2023 and are still issued in Wales. Graduates pay back what they earn above the repayment threshold at a rate of 9%. The letter says that "successive governments' adjustments to repayment thresholds – together with high interest and marginal tax rates – are placing an unsustainable burden on the next generation of workers".
It says many middle-income graduates "see less than half of any hard-earned pay rise due to a combination of income tax, national insurance and student loan repayments". It adds: "We are united in the belief that the current repayment framework requires urgent review... to ensure it is fair, sustainable, and supportive of aspiration." Powell says student loan system at top of in-tray Phone contract comparisons 'amounted to mis-selling' student loans, MPs say 'Deeply misleading' school talks compared student loans to £30 phone contracts The letter refers to a decision taken last November by then-Chancellor Rachel Reeves to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, instead of allowing it to rise with inflation. The change would result in students starting to repay their loans sooner than they would otherwise have done, and their rising salaries leading to greater repayments.
Campaigners want that decision to be reversed – a call echoed by the Treasury select committee in a report following its inquiry into student loans last month. The committee's report referenced a BBC investigation which found the government compared Plan 2 student loan repayments to £30-a-month phone contracts in promotional presentations to teenagers a decade ago. This was "inaccurate for higher earners", the report said, and "amounted to mis-selling".
Student loans inquiry finds many did not understand terms How do student tuition and maintenance loans work? Phillipson defends student loan change and says average repayments will rise by £8 a month Voluntary student loan repayments rise in England Laura Trott, shadow education secretary for the Conservatives, and Munira Wilson, education spokeswoman for the Liberal Democrats, are among MPs who have signed the letter. Tom Gordon, Liberal Democrat MP for Harrogate and Knaresborough, also signed the letter and told the BBC he could not "see an end in sight" to his own Plan 2 student loan repayments.
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