Student Loans

Neil O'Brien 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.

[Mr Charters]

rose—

[Neil O’Brien]

Perhaps the hon. Gentleman will tell me why he thinks that is fair.

[Mr Charters]

The hon. Gentleman referenced the IFS report. He will know that it has costed his proposals and that for the plan 2 cohort there would be a capital cost of £30 billion to £40 billion—I believe that could be a gaping hole. It is a seriously uncosted policy, is it not?

[Neil O’Brien]

If the hon. Gentleman reads to the end of the IFS report, he will see that it costs our proposal in single-digit billions, and we have explained exactly how we will pay for it—I will come to that in a moment—so there is no gaping hole whatsoever. No wonder so many despair, with more broken promises from the Government and ever-rising debt, and no promise of action at any particular time.

How we would pay for our proposal—this goes to the hon. Gentleman’s question—is equally important. Since the last Government created the longitudinal education outcomes dataset, we have had much better data on which degrees do—or do not—provide economic value for students and taxpayers. Economic value is not the only value put on higher education, or any kind of education, but rather than simply pushing more young people towards courses that the Government’s own data show us do not benefit them—they do not help them, and they leave them feeling like they have been mis-sold and betrayed, with a lot of debt and nothing much to show for it—we need to have a rethink. The current approach is not working.

Since the election, youth unemployment has risen to levels significantly above the eurozone’s for the first time in a generation. That is mainly as a result of the Government’s decision to target lower-paid people for tax increases and to increase regulation, but it is not helped by the Government’s unbalanced approach to skills, based on an endless expansion of university courses whether they are any good or not.

[Danny Beales]

Will the hon. Member give way?

[Neil O’Brien]

Just one moment.

Analysis by the IFS found that total returns on going to university will be negative for about 30% of both men and women—and that is based on the cohort from the noughties. The problem now is probably even bigger because the graduate premium has declined further. As a result, many graduates now earn so little that they will never fully repay their student loans, leaving the taxpayer to cover about £8 billion in losses every year. That is why we would restore the number controls that existed for 70 years and use that to reduce the number of people who are on courses that are not good value for the taxpayer and not helping the young people, either.

To listen to Labour Members, anyone would think that there was not a single bad course, that every single course is totally brilliant and that there is no prospect of ever reducing spending on any single course. That is a fantasy world. We do not say about any other type of public service that every single instance of it is completely brilliant and there is no scope for improvement. We would use the savings from our proposal not just to abolish real interest rates on plan 2 loans but to double the number of apprenticeships for 18 to 21-year-olds so that quality apprenticeships are a real choice at age 18.

Why would we do that? Recent data shows that five years after finishing a course in 2018, the average level 4 apprentice was earning £32,000; by contrast, the average graduate was earning just £26,500 and the lower quartile of graduates were earning £19,000 or less. In many cases, a high-quality apprenticeship can be a better option than a low-value university course. That is why we would make that change.

[Alex McIntyre]

Labour Members have asked Conservative Members repeatedly if they can name a course or an institution that they would cut. The hon. Member for Runnymede and Weybridge (Dr Spencer) had to make up a course in David Beckham studies—as far as I understand, that never existed—to make the point. Does the hon. Gentleman have a real course in mind, or are his made up as well?

[Neil O’Brien]

We have already talked about that. If the hon. Gentleman wants a full list, he can go on my Substack and see a whole bunch of different institutions with low returns. He can also do better than that: he can look on the DFE’s website and see that many courses lead to low earnings. [Interruption.] It is not my purpose here to single out individual courses.

We have talked quite a lot about creative arts. The Institute for Fiscal Studies says that only 4.5% of those degrees represent a positive return to taxpayers. Some people will look at a statistic like that, say that it is only worth it for taxpayers 4% of the time and say, “That is not a problem. Let’s carry on shovelling money into something that is only working 4% of the time.” Other people would say, “We have to make choices, and we could use that money, which the Government continue to shovel into low-value courses, to fund more high-quality apprenticeships and cut repayments for betrayed plan 2 voters.”

Let me be clear: the current system is unfair. The Government admit it is unfair. Like so many other things, they say they will look at it. This is a Prime Minister who we can always rely on to do the right thing once we have dragged him by the nose to do it. As the former Deputy Prime Minister says, time is running out for this Labour Government, and it is time for them to stop moaning, grow a pair and fix this problem that they have moaned about.