Plan 2 Student Loans: Repayment Terms
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Baroness Blake of Leeds (Lab)
I always listen to the noble Baroness’s questions with interest. I do not think it would be right for me to pre-empt the ongoing discussions. I think there is a general recognition that something needs to change, but it has to be done in the spirit of fairness while maintaining access for all students and making sure, as I said at the outset, that it is fiscally responsible in a complex financial situation.
Lord Mohammed of Tinsley (LD)
My Lords, I declare my interest, as I did last week, as my son recently graduated and my daughter has just started university. Will the Government consider reducing or capping the interest rates applied to Plan 2 loans, particularly during periods of high inflation, because students may well see their debt grow while they continue to make repayments?
Baroness Blake of Leeds (Lab)
The noble Lord refers to a complex situation, and it would be completely wrong of me to make any suggestion about changing interest rates or methods of repayment. But of course, all these matters are under consideration in such an important subject.
Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2026
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)
My Lords, unfortunately, my noble friend Lady Smith is unwell, so I shall speak to the draft Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2026. To begin with, I should take this opportunity to explain that within the Explanatory Note there was a discrepancy, in that the percentage increase for 2026-27 was stated as 2.7%, whereas it should be 2.71%, and the percentage increase for 2027-28 was stated as 2.8%, whereas it should be 2.68%. I can reassure Members that a correction slip has been arranged.
I thank the Secondary Legislation Scrutiny Committee for its scrutiny of the draft regulations. This statutory instrument, which was laid in draft on 5 February, will increase the limits on tuition fees that higher education providers can charge students studying undergraduate courses at approved fee cap providers in the 2026-27 and 2027-28 academic years. The SI preserves the fee limits for lower-fee foundation years at 2025-26 levels for 2026-27 and 2027-28. A separate SI making changes to maximum fee loans and student support for the 2026-27 academic year was laid before the House on 12 February.
As many Members have previously acknowledged in this House, our higher education sector is one of our country’s most valuable strategic assets, one that we should feel proud of and endeavour to protect, so that future generations of students can continue to benefit from it. Our higher education sector is admired across the globe. International students from all over the world choose to study here, making an enormous contribution to the sector, to the economy and to society as a whole. Our universities are home to world-leading research across a broad range of sectors including clean energy, digital technologies and life sciences.
The Government have set out a clear vision for the future of the sector in the Post-16 Education and Skills White Paper—a vision for a sector that drives economic growth, delivers a world-leading, high-quality experience for all students, provides national capability and increases the UK’s international standing, while also delivering regional impact for everyone who lives in this country.
There have been countless examples heard in this House about how providers are anchors in their communities, helping to break down barriers to opportunity, supporting local businesses, strengthening social cohesion and delivering important local jobs as well as outreach. Higher education providers transform the lives of the students who attend them, not only by enabling them to boost their incomes and progress in a career that they choose, but by enriching their lives through new experiences and allowing them to develop life skills, grow their networks and experience new perspectives.
However, this House has spoken at length about the challenges the sector faces. A growing number of providers are facing financial challenges. Analysis from the Office for Students from November 2025 suggests that, without mitigating action, 45% of providers could face a deficit in 2025-26. Indeed, English providers are contending with a number of financial pressures, one of which is the £1.7 billion aggregate loss on domestic teaching and the need for providers to draw on other income to cover it. Such challenges have been unaddressed for far too long, and seven years of frozen tuition fees plus overly optimistic strategic and financial planning and potential issues with governance have contributed to the financial challenge facing providers.
The Government took the immediate action needed and responded by increasing fee caps for the 2025-26 academic year and by also making reforms to the Office for Students. But the Government must go further to ensure that our higher education sector is put on a secure footing, to allow it to face the challenges of the next decade and to ensure that all students receive the world-class education they deserve. Government and the sector have a shared interest in fully realising the benefits of higher education for students, taxpayers, the economy and wider society. Government has a responsibility to ensure that the higher education sector is suitably funded, and the sector has a responsibility to ensure that it delivers the best value for students and maximises its contribution to our economy and society.
This SI is intended to put our higher education sector on a more secure footing and provide greater certainty over future funding, so the sector can focus on delivering quality provision. It will mean that, for the 2026-27 academic year, from 1 August 2026 onwards, tuition fee limits for undergraduate courses will increase by 2.71%, and for the 2027-28 academic year, from 1 August 2027 onwards, by a further 2.68%, in line with forecast inflation, based on the RPIX inflation measure. This means, for example, an increase from £9,535 to £9,790 for a standard full-time undergraduate course in 2026-27, and an increase to £10,050 in 2027-28.
Increasing fees for the next two academic years will mean that providers have greater certainty and can focus on delivering the Government’s ambition for a more specialised and more efficient sector that is better aligned with the needs of the economy. This will provide long-term certainty over future funding for the sector. We will then legislate, when parliamentary time allows, to increase tuition fee caps automatically for future academic years. These annual increases in fees, linked to inflation, will balance the need to give the sector stability with fairness to students and taxpayers.
I understand that this may raise concern about the affordability of higher education for students, but the Government are committed to ensuring that higher education is open to all who have the ability and desire to pursue it. The student finance system removes upfront financial barriers and provides additional support to those with the greatest needs, so that higher education is open to all. The Government are already making improvements to the student finance system that we inherited. To help students from disadvantaged backgrounds progress and excel in higher education, the Government are reintroducing targeted, means-tested maintenance grants of up to £1,000 per year, from academic year 2028-29. The Government have also committed to future-proof our maintenance support offer by increasing loans for living costs with forecast inflation every academic year from 2026-27 onwards.
The OfS has consulted on its future approach to quality. It will continue to hold providers to account for the outcomes that they achieve for their students, and this Government will ensure that only high-performing providers are able to charge the top rate of fees. Eligible students can continue to apply for upfront fee loans to meet the full cost of their tuition.
It is also important to remember that student loans come with a range of unique protections designed to support borrowers throughout the lifetime of the loan. Unlike commercial loans, student loan repayments are calculated solely on a borrower’s earnings, not on the amount borrowed or the rate of interest applied. Any outstanding balance, including interest, is cancelled at the end of the loan term, with no detriment to the borrower, and student debt is never passed on to family members or descendants.
The Government’s ambition is to have a more sustainable, more specialised and more efficient sector, which aligns with the needs of the economy. It is vital that higher education continues to contribute to closing the gap between people from disadvantaged backgrounds and their peers. The Government want to recognise each provider’s unique contribution and encourage them to capitalise on their comparative advantage. The Government are not going to force this specialisation; it is clear that the diversity of the sector is a strength, but each provider needs to be clear on its distinctive role in the system and move away from a one-size-fits-all approach. Each provider needs to be well run, collaborating with others to deliver the best value for students, and to operate as efficiently as possible.
In December, the Government announced reforms to the research excellence framework—the REF—to ensure that it better supports curiosity driven research, government missions, industrial strategy priorities, innovation and commercialisation. It will also reduce administrative burden and encourage greater collaboration and specialisation across universities. At the same time, the Government will protect and grow quality related research funding and redirect some UKRI funding toward areas of strategic national importance, while addressing sustainability challenges in the sector.
To conclude, this SI will put our higher education sector on a more secure footing, enabling it to continue to deliver the world-class higher education that current students and those in future generations deserve. I beg to move.
Lord Mohammed of Tinsley (LD)
My Lords, as we heard from the Minister, the purpose of this statutory instrument is an increase in tuition fee limits, indexed to inflation. The Minister has presented this as a technical adjustment that is necessary to maintain financial stability in our higher education sector. However, we must be clear: there is nothing merely technical about increasing the cost of accessing education. This is a decision with profound consequences for students, social mobility and the very character of our universities.
We recognise the genuine financial pressures facing higher education institutions. Years of frozen fees, rising costs and uncertainty over overseas students have created a challenging environment. Universities must be properly funded if they are to continue delivering world-class teaching and research. However, this instrument places the burden of that funding disproportionately on students, many of whom are already carrying significant debt and facing difficulties during this economic downturn. Our position is clear: we cannot support a policy that increases fees without wider, fairer reforms of higher education funding. Simply uprating fees by inflation risks entrenching a system that is already failing too many. It does nothing to address the long-term sustainability of the sector, nor does it tackle the inequalities faced by students from disadvantaged backgrounds.
Moreover, this approach lacks ambition. Many will ask, “Where is the comprehensive strategy for higher education? Where is the consideration of alternative funding models, maintenance support and lifelong learning?” Piecemeal adjustments such as this do not meet the scale of the challenge before us. There is a question of timing and fairness. At a moment when students and graduates are grappling with the cost of living, and when young people are questioning the value and affordability of higher education, this Committee should be wary of endorsing measures that risk further deteriorating participation.
In that spirit, I ask the Minister three questions. First, what assessment has been made of the impact of these increased fee limits on the participation of students from lower-income backgrounds? Secondly, can the Minister set out whether the Government intend to bring forward a comprehensive review of higher education funding—and, if so, when—rather than continuing with the incremental adjustments? Thirdly, what consideration has been given to increasing maintenance support alongside these fees changes to ensure that students are squeezed no further by the cost of living?
We must not accept a false choice between underfunded universities and overburdened students. By the way, I should declare my interest, as I have done on several occasions previously: my daughter is in the first year of her degree at Sheffield Hallam University, so she may well be impacted by this change.
Student Loan System
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Lord Mohammed of Tinsley (LD)
My Lords, I declare an interest: my son has recently graduated and my daughter is at university. Given the widespread concerns among graduates, particularly those on plan 2 loans, about both the freezing of repayments and interest thresholds, what assessment have the Government made about the long-term impact of these policy changes, graduates’ debt burdens and monthly repayments?
Baroness Blake of Leeds (Lab)
I feel as though I should declare an interest in having four kids who have all gone at different times and have been on different plans. It is incredibly complicated. To reassure the noble Lord, I can only say that this subject will be constantly looked at and we will be looking forward to the best solutions to make sure that our young people are encouraged to get the best education they can.
Best Start Family Hubs
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Baroness Blake of Leeds (Lab)
I acknowledge the noble Lord’s involvement in setting up the family hub programme under the previous Government. I reassure him that Best Start Family Hubs will be open to all families with children aged nought to 19 and up to 25 for young people with SEND. They will be welcoming spaces where every family feels valued and confident to ask for help. They will be open to older children and they can become part of the local youth offer, including Young Futures hubs, where that makes sense locally—these programmes will be locally driven. We are working with other government departments to determine what additional services will be included in Best Start Family Hubs. That will be reflected in further guidance, which we will publish in spring 2026.
Lord Mohammed of Tinsley (LD)
My Lords, how will Best Start Family Hubs reduce rather than deepen regional inequalities, particularly in areas with the highest child poverty rates, where pressure on local services is often greatest?
Baroness Blake of Leeds (Lab)
The commitment is to make sure that every local authority area has a family hub. Deprivation is one of the key factors in the programme. We want to make sure that all children benefit from the services on offer; it is down to local authorities to determine where their priorities are and how they can best help and give the support that families need.
Early Years Education
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Baroness Blake of Leeds (Lab)
The IFS report published last year should be essential reading for everyone, especially those who have responsibility for nurturing and developing the next generation. The evidence shows that children with access to Sure Start centres, defined as those within a 2.5 kilometre radius, performed significantly better in assessments at ages 7, 11 and 16. However, as my noble friend said, it is absolutely crucial to get children to the point where they are ready to learn when they enter early years settings, and that is what the Best Start family hubs are being set up to do.
Lord Mohammed of Tinsley (LD)
My Lords, in recent weeks, your Lordships’ House has rightly discussed the NEET figure, which totals almost 1 million young people. Can the Minister say whether any work has been done to look at that cohort of young people to see what support they had in their early years? Can we start to map out gaps for young people who are NEET because they did not have that support early on?
Baroness Blake of Leeds (Lab)
The noble Lord raises a complex issue about evidence. We need to look at cohorts of young people to understand why some of them are failing to move forward. We know, for example, that Covid has had a huge impact on mental health and has sapped confidence. It is fundamental that everything we do is evidence-based. Gathering that information and evidence is fundamental in helping to develop our policies going forward.
Girls: Science, Technology, Engineering and Mathematics
Debate between Lord Mohammed of Tinsley and Baroness Blake of Leeds
Baroness Blake of Leeds (Lab)
I think it is fair to say that I was not expecting that question, but I absolutely acknowledge and accept everything the noble Lord has said. The most important thing, of course, is that we all send our huge congratulations and recognise the contribution these young women are making, but we also have to understand that all sportspeople can be incredible ambassadors and role models. In my local area, rugby league is huge; they are getting the kids in and training. Girls’ rugby is, I think, the fastest growing sport in Leeds. If they misbehave or do not come along, they are out. The discipline is extraordinary. I thank the noble Lord for the question, and I hope he will please pass on my messages.
Lord Mohammed of Tinsley (LD)
My Lords, I want to follow up on the Minister’s previous answer concerning primary education. What steps are being taken to encourage not only science teachers but other teachers to ensure that girls get that early education that will inspire them to take this subject at a later stage in life?
Baroness Blake of Leeds (Lab)
I answered this question in the sense of needing to get into primary schools to start to change attitudes. Working with teachers and professionals is critical in this, and that is why we are investing in the workforce and training, and in getting a greater awareness of why there are these barriers. We have to work with families across the piece. Families do not understand the complexity of the system. We need to break down that complexity and ensure greater ownership of young people’s futures.