Key facts
- Over 120 MPs and peers have signed an open letter to Chancellor John Healey.
- The letter calls for an urgent review of the student loan repayment system.
- Campaigners argue the current system places an "unsustainable burden" on future workers.
- The debate has largely centered on Plan 2 loans for students in England between September 2012 and July 2023.
- A previous decision to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030 is a key point of contention.
An open letter, coordinated by the campaign group Rethink Repayment and signed by over 120 MPs and peers, has been sent to Chancellor John Healey urging an "urgent review" of the student loan repayment system. The signatories contend that the current framework imposes an "unsustainable burden" on the next generation of workers, particularly highlighting issues with Plan 2 loans. These loans, taken out by students in England between September 2012 and July 2023, require graduates to repay 9% of their earnings above a specific threshold. The letter criticizes "successive governments' adjustments to repayment thresholds – together with high interest and marginal tax rates," stating that many middle-income graduates see less than half of their pay rises after deductions. A specific point of contention is the decision by then-Chancellor Rachel Reeves to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, preventing it from rising with inflation. This change means graduates will start repaying sooner and potentially repay more over time. The Treasury select committee has also echoed calls for a review, referencing a BBC investigation that found the government had inaccurately compared Plan 2 loan repayments to phone contracts in promotional materials. MPs like Tom Gordon have expressed personal concerns, noting that even with an MP's salary, full repayment within the 30-year term seems unlikely, raising questions of fairness. Oliver Gardner, founder of Rethink Repayment, emphasized that the student loan issue is not partisan. A Department for Education spokesperson acknowledged that the inherited system is "broken and unfair" and stated that the government is considering its response to the Treasury Committee's inquiry.