Student Loans

Tessa Munt Excerpts

Wednesday 18th March 2026 Commons Chamber

[Georgia Gould]

I have made it very clear that we want to increase the quality of courses, and that is one of the conditions that we attached to increasing the fees in a fair way, but we want to do that by ensuring that those courses are of high enough quality, rather than scrapping the opportunity for young people to go on them.

Looking further ahead, I can tell the House that the Prime Minister’s ambition is to see two thirds of young people in higher-level learning by the age of 25. With the lifelong learning entitlement, which will be launched in January 2027—a policy that the last Administration failed, year after year, to deliver—we are transforming higher education from a “one-shot” opportunity into a flexible and responsive system with learners at its centre. As was mentioned earlier, the LLE will allow learners to fund individual modules and reskill throughout their careers, at colleges and universities alike.

We now have a responsibility to ensure that the benefits of higher education are maintained for future generations, and to clean up a student loan system in which interest rates have been allowed to spiral and students are confused about what is the right path for them. We absolutely recognise that there are failings in the system, but it is not a system that we built; it was a system that the Conservatives created. We know that student loan repayments are a concern for graduates, which is why we increased the plan 2 repayment threshold last year and why we are increasing it again next month, to £29,385. Borrowers who earn below that amount annually will not be required to make any repayments at all. This threshold is higher than the median graduate salary three years after graduation.

Graduates generally go on to benefit from higher earnings, and it remains reasonable for those who gain the largest financial benefits from their degrees to contribute more towards the cost of their studies than those who have not gone to university, or graduates earning lower salaries. Lower earners will still benefit from the unique protections that student loans offer. Any unpaid loan balance, including interest accrued, will still be cancelled at the end of the loan term at no detriment to the individual, outstanding debt is never passed on to a borrower’s family, and having an outstanding student loan is not a barrier to accessing a mortgage. Student loan balances do not appear on borrower credit records, although regular student loan repayments will be considered, alongside other living costs, as part of the affordability check for mortgage applications.

I want to say how seriously the Government take the cost of living challenges that young people face. Too often this generation have found their challenges ignored. We are working hard to tackle these issues by extending Government-funded childcare, reducing energy bills, freezing rail fares, rolling out free breakfast clubs, building new homes and introducing the Renters’ Rights Act 2025.

Before Conservative Members once again line up to criticise the decisions that we have made, I would like to take a moment to remind them of their track record on this matter. Plan 2 student loans were designed and introduced in 2012 by the Conservative-Liberal Democrat coalition, with a repayment threshold of £21,000 per year and interest rates of up to 3% above inflation. Those are the very interest rates that the Conservatives and Liberal Democrats are now calling to be reduced. Having said that they would increase the plan 2 repayment threshold to reflect earnings, they froze it for four years. The Conservatives then froze it in 2016 and in 2017, and again from 2021 to 2024. In total, there was a decade of freezes by the opposition parties. It is their mismanagement that now necessitates a further freeze to the threshold. I do not remember any of this outrage from those Members when they created and built this system.

As we have heard, the Opposition’s solution is to cut courses and cut opportunities. We will not make reckless and unfunded changes to student loans. Student finance and higher education funding is a complex, interconnected system. We are considering a range of options to make the system fairer, but we must be fiscally responsible and consider carefully how change would be funded. Politics is about choices.

[Tessa Munt (Wells and Mendip Hills) (LD)]

Would the Minister consider doing something about the cost of accommodation in university towns and cities? Where I come from in north Somerset there is no university, and at the moment people do not really have the option to go anywhere except a city, which is incredibly expensive. Would she give some consideration to reducing those costs on ordinary working families?

[Georgia Gould]

I thank the hon. Member for that comment, and that is why we are supporting maintenance grants to help students with the cost of living.

I will conclude by saying that our approach to further reform of the system will be deliberate, evidenced and fiscally responsible. We are here not to tear down the house, but to repair the roof that was left to leak.