Salford MP, Rebecca Long-Bailey, whilst calling on the Government to develop a sustainable funding model for Higher Education and university research which sees the abolition of tuition fees as a long term goal, is calling on the Chancellor to immediately reverse the three year freeze on the Plan 2 repayment threshold, and to meet with campaigners to implement wider urgent proposals to reform the broken student loans system.

Rebecca said:

“What I am hearing from graduates in Salford is not simply frustration, it is genuine anxiety about their financial futures. People who have done everything asked of them are making repayments month after month, yet watching their balances rise rather than fall.

“The three-year freeze on the Plan 2 repayment threshold will mean thousands of graduates paying more, sooner, and for longer. Combined with RPI-linked real interest rates, this creates a system where debts can grow rapidly, even for those on modest incomes. That is neither stable nor fair.

“Many young people signed up to this system as teenagers, without the financial education needed to understand compounding interest or the possibility that repayment terms could later be changed. Governments should not be able to alter the rules retrospectively in ways that leave borrowers worse off.

“We need urgent, practical reform of the student loan system, with a long term goal of developing a sustainable funding model for Higher Education and university research which sees the abolition of tuition fees, but in the immediate short term we need to see implementation of the very small requests campaigners are making: reversing the threshold freeze, a cap on the total amount repayable, reviewing the current unfair measure of interest rates, and pausing interest accrual during statutory parental leave. The current model is no longer fit for purpose.”

The Plan 2 scheme, introduced in 2012, requires graduates to repay 9% of earnings above the repayment threshold. However, many borrowers have seen their balances increase despite years of repayments, due to interest accumulation and threshold freezes.

Consumer finance expert Martin Lewis has also criticised the threshold freeze, describing it as “not a moral thing” to do and warning that young people were never properly informed that governments could retrospectively alter key terms of their loans.

Rebecca is calling on the Chancellor to meet with campaigners and look to:

• Reverse the three-year freeze on the Plan 2 repayment threshold

• Introduce an interest cap to limit the total amount repayable

• To replace RPI with CPI or CPIH as the inflation measure used for student loan interest

• Pause interest accrual during statutory parental leave

Rebecca also reiterated her support for scrapping tuition fees as a long-term goal, arguing that higher education and apprenticeships should be a positive financial pathway both for our wider economy and the living standards of our communities, not the start of working life burdened by escalating debt.

—Ends—

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Notes to editor:

• A PDF copy of the letter can be found here.

• Plan 2 student loan interest is currently set at RPI plus up to 3%, depending on income. RPI lost its status as a National Statistic in 2013 due to methodological concerns. The Government has confirmed that RPI will be aligned with CPIH methodology from 2030. CPI is the UK’s principal measure of inflation and is used by the Bank of England for its inflation target.