Backbench Labour MPs have condemned the student loans system in England and Wales, with one describing it as an “outrageous scam” and another likening its terms to those offered by a “loan shark”. During a Westminster Hall debate on Wednesday, several MPs called for urgent reform of the “plan 2” loan system, which affects an estimated 5.8 million graduates who took out loans between 2012 and 2023.
Alex Sobel, MP for Leeds Central and Headingley, said plan 2 borrowers were being “burdened with unattainable debt levels and interest rates”. Jas Athwal, the MP for Ilford South who called the debate, described the system as “predatory, regressive” and said it “kills graduates’ ambitions”. Luke Charters, the MP for York Outer and a plan 2 graduate, called it “an absolute dog’s dinner” and a “Frankenstein’s mess”. Kate Osborne, MP for Jarrow and Gateshead East, said the interest charged was “a scandal and a rip-off”.
Bell Ribeiro-Addy, MP for Clapham and Brixton Hill, compared the terms to “something that a loan shark would offer” and said freezing the repayment threshold was “a one-sided breach of contractual terms”. Liberal Democrat MP Josh Babarinde referenced the Eagles’ song “Hotel California”, saying graduates could “check out, graduate, but never leave” due to ballooning debts.
The debate follows the chancellor Rachel Reeves’ decision last November to freeze the salary repayment threshold for plan 2 loans for three years, contradicting the original commitment to uprate it annually with earnings. Prime Minister Keir Starmer later said the government would “look at ways” to make the system fairer. A Downing Street spokesperson indicated that the interest rate and repayment threshold were under review.
Education Secretary Bridget Phillipson has acknowledged “problems” with the plan 2 system but suggested the government’s priority is maintenance grants for poorer students. A government spokesperson defended the threshold freeze as necessary to protect taxpayers and students, adding that the system protects lower earners and cancels outstanding debt at the end of the repayment term.
