A coalition of over 120 MPs and peers has formally requested that Chancellor John Healey initiate an urgent assessment of the current student loan repayment structure. The open letter, organized by the group Rethink Repayment, argues that the existing system places an unfair and heavy financial strain on the newest workforce members.
The signatories include lawmakers who hold Plan 2 loans, which have faced significant criticism this year. Education Secretary Lucy Powell recently described the interest rates associated with these loans as egregious, noting that addressing the matter is a top priority for her department.
The debate largely revolves around Plan 2 loans, which impact students in England who began their studies between 2012 and 2023, as well as current students in Wales. These graduates are required to contribute 9% of their earnings above a specific threshold. The letter highlights that changes to these thresholds, combined with elevated interest rates and high marginal tax rates, leave many middle-income graduates struggling, as they retain less than half of their pay raises.
Critics specifically point to a decision made last November by former Chancellor Rachel Reeves to freeze the repayment threshold, preventing it from adjusting with inflation. This freeze forces graduates to begin repayments earlier and pay more as their salaries increase. The Treasury select committee recently supported calls to reverse this decision, following reports that government materials previously misled students by comparing loan repayments to simple phone contracts.
Liberal Democrat MP Tom Gordon, who signed the letter, highlighted the lack of fairness, questioning how an average earner could possibly manage the debt if someone with an MP’s salary faces a 30-year repayment cycle without full clearance. Rethink Repayment founder Oliver Gardner described the initiative as a non-partisan effort to establish a sustainable and equitable system for all graduates.
In response to earlier reports, a government spokesperson stated that officials are working on decisive actions to ensure the system remains fair for students and taxpayers alike while maintaining financial stability.