Ministers are exploring options to ease the burden of Plan 2 student loans following weeks of pressure, the Guardian understands. The Treasury and Department for Education are reviewing measures such as increasing repayment thresholds, which have been frozen at £29,385 until 2030, causing graduate repayments to rise by up to £300 a year.
Labour MPs have lobbied the government to reverse the freeze, with sources suggesting this has not been ruled out and could be attributed to an improving economy. The rethink comes after a backlash over the 'mis-selling' of loans, with many graduates believing they would not repay until earning significantly higher salaries.
Conservative leader Kemi Badenoch attacked Prime Minister Keir Starmer over the system during PMQs, calling it a 'debt trap'. Starmer responded that the Conservatives 'scammed the country' and inherited a broken system, adding that the government is looking at ways to make it fairer.
Consumer rights expert Martin Lewis joined the debate, stating the loan term changes would not be allowed for a commercial loan, calling it a 'breach of contract'. He urged Chancellor Rachel Reeves to reverse the freeze and link thresholds to average earnings.
Labour MP Luke Charters, who has a Plan 2 loan, described the system as a 'dogs’ dinner' and called for significant reform. Another MP, Chris Hinchliff, said the government must address the threshold freeze before the next election.
