Student Loan Repayment Plans

Sarah Russell Excerpts

Wednesday 25th February 2026 Westminster Hall

[Sarah Russell (Congleton) (Lab)]

I am pleased to see you in the Chair, Ms Lewell. I thank my hon. Friend the Member for Ilford South (Jas Athwal) for securing this debate.

The system just is not fair; it does not make any sense and it does not set people up well for life. Realistically, a person makes a decision about whether to go to university when they are about 16 or 17 years old. We would not let banks lend money to 16 and 17-year-olds on these terms—we would think it wrong; people cannot enter into those contracts until they are 18—but when someone makes the decision to apply to university, unless they are from a very wealthy background, they are essentially signing up to a huge amount of ongoing debt.

Young people quite rightly aspire to own homes, start families and have the same sort of life and pension savings that the generations before them had, and I do not see how that is unreasonable. Yet we are allowing a system to persist in which many of them are paying 9% of their income, on top of the tax they already pay, spiralling house prices and the incredibly high requirements for childcare, if they wish to have a family. Of course, Labour has rightly helped with many of those problems, but the student loans system remains a barrier to opportunity.

We should have great aspirations for our young people. Education is a right, and should not be a privilege, but those privileged enough to have parents who can pay for their fees up front have a massive benefit over everyone else. That is wrong and it needs to change.

--- Later in debate ---

[Jack Rankin (Windsor) (Con)]

It is a pleasure to serve under your chairmanship, Ms Lewell. I thank the hon. Member for Ilford South (Jas Athwal) for securing this important debate and highlighting one of the major challenges facing many young people in this country today: student loan repayments. Despite my youthful looks, I can clarify that I am on the last year of plan 1 loans, so this issue does not directly affect me. I have many contemporaries in that situation, though, and I think I understand it well.

When growing numbers of graduates are leaving university with mountains of debt and graduate recruitment is at a record low, there is an urgent need to address a system that is failing graduates. The hon. Member for Ilford South asked for broad agreement on that point. Although I did not agree with everything in his remarks, I think he has broad support across the House that the system as currently designed is not working. This issue affects a huge proportion of young people, given that over 50% of them now go to university. Combine that with a 30-year lifespan, and it becomes a generational problem.

Perhaps by coincidence, rather than design, this debate coincides with the announcement made by His Majesty’s most loyal Opposition of a new deal for young people. I acknowledge that it is partly responsive, but it has helped to bring the issue to the top of the news agenda. This debate could not be timelier. For young people, particularly those on plan 2 loans, there is not a moment to lose.

[Sarah Russell]

The hon. Gentleman has referred to plan 2 loans but plan 3 loans were also brought in by his Government. Plan 3 loans are for those with postgraduate qualifications—people who are definitely making an economic contribution to our society—and now kick in from when they earn £21,000. Does he agree that that was the wrong thing for his Government to do?

[Jack Rankin]

I do not want to talk about each plan individually, but this does need to be looked at in the round, as the hon. Lady is quite right to say.

Returning to the hon. Member for Ilford South, I am glad that he recognised—which some of his colleagues did not—that the beneficiaries of student loans should be asked to contribute. He called for fairness. I agree with him that, as it stands, the balance is not quite right. To my mind—the hon. Member for York Outer (Mr Charters) spoke to this—the main issue that we have seen is the breach of the promise on thresholds being frozen and on interest rates being increased. I acknowledge that we did that in government, but it has happened most recently in the recent Budgets. That is morally indefensible.

The hon. Members for Leeds East (Richard Burgon) and for York Central (Rachael Maskell), who I do not think are in their places anymore, made similar contributions from a left-wing point of view. I gently suggest that the mechanisms for mass debt cancellations, or even more, what they call “progressive taxation”, is not where we need to be. I am afraid I consider that to be the politics of the magic money tree. When we look at what is happening, one of the things that graduates are upset about is the unreasonable marginal rates of tax that they face as graduates when the student loan is included. More so-called “progressive” marginal rates of income tax would be part of the problem, not part of the solution.

I am aware that many a Conservative ex-Minister has stood at the shadow Dispatch Box and criticised the Government for things they themselves were doing in the recent past, so I say this with some self-awareness, but I say to the hon. Member for Eastbourne (Josh Babarinde) that the Liberal Democrats have to be careful on this issue—the faces on the Government Benches when the Liberal Democrats made some of their remarks were quite the picture.

The hon. Member for Dulwich and West Norwood (Helen Hayes), who I believe is the Chair of the Education Committee, made a fair point about the balance in education between economic outcomes and the broader social good of education. I agree with her that the case for education is broader than just economic, but I suggest that there is a balance. We have to be careful about whether it is progressive to send working-class children on university courses that will laden them with debt, but not provide them with the economic outcomes that they might need. There is a balance there to tread.

My hon. Friend the Member for Chester South and Eddisbury (Aphra Brandreth) talked about the nuance here, between the oppressive interest rates and the 30-year repayment threshold.

--- Later in debate ---

[Josh MacAlister]

That is a very timely intervention, because when we were elected we recognised the pressures and acted. In this Parliament, the Government are lifting the plan 2 repayment threshold to £29,385, ending a four-year freeze. We have acted to ensure that the threshold rises to above average graduate salaries, because that was the right thing to do, despite the fiscal pressures we faced. Due to the enormous pressures on budgets and the need for fairness across the education system, especially in further education, and to support the long-term sustainability of the student loan system, we announced at Budget 2025 that the Government will freeze plans for repayment thresholds at £29,385 for three years from April 2027. I note that, even with that freeze, a borrower earning £30,000 will repay around £4 a month and the average plan 2 borrower will repay about £8 more a month.

The freeze will generate £5.9 billion—money that this Government are investing back into young people. We are making improvements to the education system, and the threshold freeze contributes to that. The improvements are happening both in higher education and in the wider skills landscape. We will be investing £1.2 billion more in skills training per year by 2028-29, ensuring that we develop and nurture the skills that many young people who do not go to university need for the future. We are supporting colleges, apprenticeships and technical training, areas that have too long been neglected by other parties, with record funding. I see the benefits of much of that in my constituency, where many young people choose to pursue education through vocational and technical routes. We are setting up technical excellence colleges, ripping out the red tape from the apprenticeship system, and ensuring that more foundation apprenticeships get young people into trades and careers that give them a brighter future.

Politics is about choices. When a Government come in and all public services are in a mess, they have to work through their priorities. Just this week, we have announced generational changes to the special educational needs system. Just today, the Government are announcing major changes to ensure that people can see timely justice in the courts. We are also making changes to improve the student finance system. First, from January 2027, the lifelong learning entitlement will enable learners to use student loans more flexibly than ever before. Secondly, from the 2028-29 academic year, we will introduce targeted, means-tested grants, which, again, were scrapped by the previous Government. Thirdly, to support students from the most disadvantaged backgrounds, we are future-proofing our maintenance loan offer, with loans for living costs increasing in line with forecast inflation every academic year.

This Government recognise the strength of feeling on the student loan system, particularly plan 2, and we will always look at issues that are important to the public. We will continue to keep this system under review.

[Sarah Russell]

The Minister has spoken very well about plan 2, and we are grateful that he will be looking at it, but so far as I can tell, plan 3 thresholds have remained frozen for postgrads at £21,000 since their inception. That is deeply unjust. Will he commit to looking at plan 3 as well as plan 2?

[Josh MacAlister]

As the Secretary of State said earlier this week, we will look at these issues.

Across the board, we are acting as a Government to support people with the cost of living: investing in free childcare, freezing rail fares, cutting energy bills—there is welcome news on that today—and introducing measures on rights at work and protections for renters. We understand the pressures facing young professionals and young graduates. As the Secretary of State has made very clear, we will of course look at this system in the round and at how it can be improved. I thank hon. Members for their contributions to the debate.