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A committee of MPs is launching an inquiry into the student loan system and whether it’s fair for graduates
The investigation will put further pressure on the government to relieve the burden on young people.
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The Treasury Committee, a cross-party group, said it’s responding to people who are “intensely dissatisfied with the terms” of their loans, after the chancellor announced she’ll freeze repayment thresholds from next year.
“This inquiry is about fairness,” said Labour MP and committee chair, Dame Meg Hillier.
“Fundamentally, what we’re asking is: have the goalposts been moved in a way which is unfair to graduates?”
The debate around plan 2 loans – given to young people who went to university between 2012 and 2023 – has intensified since Rachel Reeves’ budget in November last year.
Since then, a growing number of Labour MPs have urged the government to change course, while the Conservatives – to calls of hypocrisy – have said they’d cut the amount of interest owed.
What’s the deal with plan 2 loans?
These loans are especially controversial because of the high interest rates. According to the Institute for Fiscal Studies (IFS), plan 2 students now leave university with more than £50,000 in student loan debt.
A graduate pays back 9% of their monthly earnings when their salary gets above the £28,470 threshold. Typically, interest is then charged at the Retail Price Index (RPI) rate of inflation, plus around 3%. It means that many see their debt increase, despite regular monthly repayments.
Labour will increase the repayment threshold next month and then freeze it for three years. It’s the freeze that many backbenchers and graduates want to see reversed.
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