Student Loans

Adam Thompson Excerpts

Wednesday 18th March 2026 Commons Chamber

[Neil O'Brien (Harborough, Oadby and Wigston) (Con)]

In January, the Chancellor was saying that the student loans system was “fair and reasonable”. She now admits —as of yesterday—that it is broken. In one sense, we have won this debate even before it started. The Government say that they are looking at these issues, but they would not be looking at them if it were not for the Opposition raising them, and I do not find the promise to “look at these issues” very reassuring, given their track record.

In the run-up to the last election, the Education Secretary promised: “Graduates, you will pay less under Labour”. Unbelievably, that is still up on her website. Instead, Labour has increased fees so that graduates are paying more, not less. On top of that, the Chancellor has cut the repayment threshold in real terms so that graduates are paying a further £250 a year. Actions speak louder than words.

To get elected as Labour leader, the Prime Minister promised to abolish tuition fees. Instead, he has increased them. He used to say, “We need to end the scandal of spiralling student debt,” but now he is letting it spiral. When the Minister says, “We will look at it,” we are not reassured. I thought the best speech of the afternoon was from the hon. Member for Gloucester (Alex McIntyre), who said in plain terms that he would not prioritise fixing this problem and would spend the money on something else. That kind of blunt honesty is better than the line from the Chancellor, who says “Graduates, your call is very important to us. Please continue to hold, and eventually perhaps we will do something about it.”

This system was set up with the best of intentions, but I have been arguing against it for as long as I have been in this House. The above-inflation interest rates have long been recognised as a problem. That is why our 2022 reforms abolished real-terms interest rates for all future students, but now we need to go back and end these unfair challenges for past students too.

There are lots of different ways to explain how unfair the current system is. Those on plan 2 are paying back far more than they ever borrowed. The typical plan 2 graduate needs to earn £66,000 a year just to keep track with the interest. The total volume of money owed by plan 2 students is increasing every year, even though no new loans are being taken out and they are paying back billions every year. Between the lower and upper interest rate threshold, for every additional £100 a graduate earns, they repay an extra £9, but their debt also accrues an additional £7.20 in interest. In fact, a plan 2 graduate who has £69,000 or more of debt—a doctor or someone like that—sees their debt increase faster as their earnings and repayments increase, because the interest effect outweighs the repayment effect. It is a totally perverse system.

[Adam Thompson]

The hon. Member talks about the effect of interest over time. Given that the loans are eventually written off under the current system, can he tell me what threshold a salary would have to be at for the proposed changes in interest to make any realistic difference over the course of a graduate’s entire life?

[Neil O’Brien]

Yes, and I am grateful for that question. Under our proposed reforms, four fifths—80%—of plan 2 graduates would benefit and pay less over their lifetime. The hon. Gentleman can look up all this stuff on the IFS website if he wants to check.

There are so many personal stories here. The other day, one doctor was recounting how she graduated with £75,000 of debt, has worked hard for years and has paid off every year, but she now owes £90,000.