Dorset MP feels graduates were “mis-sold and misled” about student loan repayments
The MP for Mid Dorset is urging the chancellor to urgently review the student loan repayment system
The MP for Mid Dorset has joined calls for an urgent review of England’s student loan repayment system, warning that changes to repayment thresholds are placing growing pressure on young workers.
Vikki Slade has sponsored a Bill that will require the government to review how student loans are repaid, essentially arguing the current system creates an “unsustainable burden on the next generation of workers”.
The debate centres on Plan 2 student loans, taken out by students in England between September 2012 and July 2023. Graduates repay 9% of their earnings above the relevant repayment threshold.
MP Slade said the system was influencing both career and education decisions.
“It can't be right that people who are barely above the minimum wage are having to pay and that people are making different job choices based upon what they're going to be paying back,” she said.
“We're seeing people not take promotions or pay-rise and even people choose not to go to university because they're worried about the level of debt.”
The campaign has focused particularly on the decision taken by then-chancellor Rachel Reeves last November to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, rather than allowing it to increase with inflation.
The effect will be that some graduates begin repaying their loans sooner than they otherwise would have done, while increases in their salaries could result in larger repayments.
Campaigners are calling for the decision to be reversed.
A letter argues that successive changes to repayment thresholds, combined with interest and other marginal deductions, mean middle-income graduates can retain less than half of some pay rises after income tax, national insurance and student loan repayments.
Education Secretary Lucy Powell has described the interest rate on student loans as “egregious” and said the issue was at the top of her in-tray.
Ms Slade said the rules needed fundamental reform to make the system fairer and more sustainable.
She also questioned whether borrowers had been given sufficient warning that repayment terms could change after they had taken out their loans.
“I believe my children, along with many others, were mis-sold and misled,” she said, arguing that the ability to alter the terms of a loan retrospectively would not normally be permitted in other forms of finance.
Ministers have subsequently said they would make clear that governments can change repayment rules and that career choices can affect how much borrowers repay.
The government has accepted some, but not all, recommendations from 120 MPs on the issue. It has not said whether it will reverse the planned freeze in the repayment threshold for affected graduates.
Vikki Slade said the issue should be approached as a problem to solve rather than a political contest.
“Let's just fix the problem and make sure that young people who already have enough issues can have a good education,” she said.