Ministers are examining options to ease the burden of Plan 2 student loans, following weeks of pressure over a policy that has drawn more graduates into repayments. The Treasury and the Department for Education are reviewing measures such as increasing repayment thresholds, which have been frozen at £29,385 until 2030, potentially costing graduates up to £300 more per year.
Conservative leader Kemi Badenoch has proposed changing the inflation rate applied to loan repayments, criticising the system as a 'debt trap' during Prime Minister's Questions. Prime Minister Sir Keir Starmer responded by accusing the Conservatives of 'scamming the country' and inheriting a broken system, promising to explore ways to make it fairer.
Consumer rights expert Martin Lewis joined Badenoch to discuss his campaign, calling the frozen threshold a 'breach of contract' and urging Chancellor Rachel Reeves to reverse the decision. Labour MPs, including Luke Charters and Chris Hinchliff, echoed calls for reform, with Charters describing the system as a 'dogs’ dinner'.
Sources suggest reversing the freeze has not been ruled out, though any changes are unlikely to be announced in next week's spring statement. The government is also under scrutiny for using the RPI measure of inflation, which it acknowledges overstates price rises, leading to graduates facing an effective marginal tax rate of 51% on earnings over £50,270.
