Kemi Badenoch has announced that the Conservatives would scrap the high interest rates on student loans, which she described as an 'unfair debt trap'. The Tory leader accused Labour of offering a worse deal for young people, pointing to rising youth unemployment and low graduate recruitment.
The plan would abolish real interest rates on Plan 2 student loans, meaning loans would not rise faster than RPI inflation. Shadow education secretary Laura Trott said the change would be funded by cutting tens of thousands of university courses deemed not to provide 'value for money'.
Education secretary Bridget Phillipson acknowledged the system had 'problems' but suggested the government's priority was maintenance grants for poorer students rather than cutting interest rates. She criticised the Conservatives for complaining about a system they designed and implemented in 2012-13.
The row escalated after chancellor Rachel Reeves froze the salary threshold for Plan 2 repayments for three years in November. Labour MP Nadia Whittome revealed she had left university with £49,600 debt in 2019 and, despite being in the top 5% of earners, had only repaid £1,000.
Treasury minister Torsten Bell warned the policy could lead to university closures if it involved capping student numbers. A source close to shadow chancellor Mel Stride said the Tories wanted to rebalance the economy towards young people.
