Chief Secretary to the Treasury Lucy Rigby has defended the government's right to alter student loan terms, arguing the heavily subsidised system justifies such changes. Speaking to MPs on Wednesday, she said student loans differ significantly from commercial loans due to government subsidies, giving the state authority to modify terms.
The controversy stems from Chancellor Rachel Reeves' decision to freeze the salary repayment threshold for Plan 2 loans for three years, alongside above-inflation interest rates. Consumer campaigner Martin Lewis criticised the move, stating no commercial lender could legally change loan terms in such a manner.
Rigby told the Treasury select committee that most students could not obtain commercial loans due to lack of credit history or collateral, and that the system allows for debt write-off if repayment thresholds are not met. She emphasised fairness to taxpayers, noting less than half of young people attend university.
The committee is investigating student loans and graduate taxation. Last week, campaigners described graduates as 'cash cows' for policies like the state pension triple lock. Former education review chair Philip Augar compared the situation to car finance mis-selling, but Skills Minister Jacqui Smith rejected the analogy.
Over 52,000 people responded to the committee's call for evidence, with many describing interest rates as 'extortionate' and higher than mortgage rates. A government spokesperson said steps have been taken to make the system fairer, including raising the repayment threshold for the first time since 2021 and capping interest rates this year.
