Overview
- Prime Minister Sir Keir Starmer told MPs the government will look at ways to make the student loan system fairer, but no changes have been announced.
- Chancellor Rachel Reeves’s budget policy freezes the Plan 2 repayment threshold—reported around £28,470 to £29,385—for multiple years, effectively increasing payments as earnings rise.
- Officials are considering options reported to include raising the threshold or cutting interest, with further ideas such as switching from RPI to CPI or introducing a lifetime cap on interest also discussed.
- Plan 2 loans charge interest at RPI plus up to 3% and require 9% repayments on earnings above the threshold, a structure critics say leaves many balances increasing faster than graduates can repay.
- Pressure has intensified across parties and from campaigners, with Martin Lewis meeting Kemi Badenoch after their televised clash and Labour backbenchers and Lib Dems urging swift reforms despite Treasury cost concerns.