Student loan repayment rates an 'unsustainable burden', chancellor told

**Chancellor Urged to Address 'Unsustainable Burden' of Student Loan Repayments**

Over 120 Members of Parliament and peers have called upon the Chancellor to initiate an "urgent review" of the student loan repayment framework, asserting that the current system imposes an "unsustainable burden on the next generation of workers."

An open letter, orchestrated by the campaign group Rethink Repayment, highlights the concerns of cross-party signatories, including MPs who themselves hold Plan 2 student loans, a category that has drawn considerable attention this year. Last week, Education Secretary Lucy Powell characterized the interest rate on these loans as "egregious," indicating its high priority on her agenda.

Student loan plans vary for current and former students based on their UK residency and university attendance dates. While the letter to Chancellor John Healey refrains from specifying a particular plan or nation for reform, the discourse has largely revolved around Plan 2 loans. These loans were issued to students in England between September 2012 and July 2023 and remain in effect in Wales. Graduates with Plan 2 loans repay 9% of their earnings above the repayment threshold.

The letter contends 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 further states that 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." The signatories are "united in the belief that the current repayment framework requires urgent review... to ensure it is fair, sustainable, and supportive of aspiration."

The letter specifically references a decision made last November by then-Chancellor Rachel Reeves to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, rather than allowing it to adjust with inflation. This change would compel students to commence loan repayments sooner and lead to increased repayments as their salaries rise. Campaigners advocate for the reversal of this decision, a sentiment echoed by the Treasury select committee in its recent report on student loans.

The committee's report also cited a BBC investigation that revealed the government, a decade ago, compared Plan 2 student loan repayments to £30-a-month phone contracts in promotional presentations to teenagers. The report deemed this comparison "inaccurate for higher earners" and concluded that it "amounted to mis-selling."

Among the signatories are Laura Trott, shadow education secretary for the Conservatives, and Munira Wilson, education spokeswoman for the Liberal Democrats. Tom Gordon, Liberal Democrat MP for Harrogate and Knaresborough, also signed the letter and shared with the BBC his expectation that his own Plan 2 student loan debt would be written off after 30 years, as he does not foresee repaying it in full.

Gordon questioned the fairness of the system, stating, "If someone earning an MP's salary still isn't likely to repay their student loan in full, what chance does someone on a much lower income have?" He criticized the retrospective changes to repayment terms and increased interest rates, arguing, "No bank or mortgage lender could retrospectively rewrite the terms of a loan like that. It simply wouldn't be allowed. So why should the government be able to do it?"

Oliver Gardner, founder of Rethink Repayment, emphasized that the letter demonstrates the "student loans crisis" is not "a partisan issue." He expressed the belief that "now is the time to create a system that is fair and that unshackles millions of graduates from mountains of student loan debt."

A spokesperson for the Department for Education acknowledged the inherited system as "broken and unfair," with some graduates feeling its impact more acutely. They stated, "We want to make sure the student loans system works better for everyone and are considering our response to the Treasury Committee's inquiry."