Thank you to those constituents who have written to me about student loans and sharing their deep concerns. I have also heard from frustrated and upset parents who are very worried about the huge debt their children have accrued as a result of these now daunting loans, including those whose Plan 5 student loan repayments which began in April 2026.
I wrote a detailed statement on the issue of Plan 2 student loans back in March which you may find of interest.
Mims Davies MP Statement on Student Loans | Mims Davies
I do greatly recognise that too many young people feel very let down by the Government as it presides over record levels of youth unemployment, the lowest graduate recruitment levels on record and 700,000 graduates on benefits. I also strongly understand the sense of significant frustration, anger and unfairness rightly felt by students and graduates about the repayment structure of student loans and the interest rates, which is why I think the Opposition's New Deal for Young People is exactly what is needed.
Conservatives pledge to cut Student loan interest
This Conservative New Deal for Young People would rightly reverse the Chancellor's threshold freeze and scrap real interest rates on Plan 2 student loans, double apprenticeships and stop dead-end degrees. While Labour MPs voted against these plans, my colleagues and I will continue to urge the Government to adopt our New Deal for Young People.
I believe the Leader of the Opposition, Kemi Badenoch, is right to focus on abolishing real interest rates on Plan 2 student loans. Graduates on Plan 2 student loans pay increasing rates of interest above inflation as their salary increases, meaning debt increases faster than most can pay it off. Abolishing real interest rates would reduce lifetime repayments and mean more graduates could become debt-free earlier.
This will ensure student loan balances will never rise faster than RPI inflation. Under this plan, a doctor in 2029 with £80,000 of student debt will save £58,000 in lifetime repayments and clear their loans sooner, while a graduate with £40,000 of student debt on a salary of £50,000 would save £26,000 in lifetime repayments - and would clear their loan five years faster than under the current system.
Under the current, clearly failing, system, we know Plan 2 loan graduates have seen the balance they owe rise for years, even while significant repayments are made. This leads to an endless cycle of debt for too many, while the taxpayer has to pick up the tab for those who are never able to fully repay their balance and write off their loans. The Institute for Fiscal Studies estimates that the average Plan 2 graduate needs to earn £66,000 a year just to keep pace with the interest.
I am aware the Government has announced that interest on some Plan 2 loans will be capped at 6 per cent in the coming academic year. However, these proposals do not go far enough as graduates will still be ripped off paying interest above inflation. I believe interest above RPI should be scrapped entirely for student loans.
The Government is also making things worse for graduates with its plans to freeze repayment thresholds, which would increase repayments for lower- and middle-income graduates, who are already struggling financially, even more. My colleagues and I will continue to urge Ministers to stop the freeze, but it is disappointing that the Government ordered Labour MPs to vote down these plans in Parliament.
While graduates on Plan 5 student loans have a slightly lower repayment threshold, this is meant to increase in line with inflation from April 2027.
The Treasury Select Committee which published its report in July 2026 is right to highlight that the student loan system is broken.
Student loans: Broken and unfair?
We, in the Conservative Party, have previously highlighted the wider challenge created by the backdrop of high inflation, which risks placing additional pressure on a generation already managing significant financial burdens. As Kemi said in Prime Minister’s Questions (PMQs),
‘Policies that may have been fine for 2012, with low interest rates, are not fine for 2026’.
I roundly agree - what worked in 2012 is clearly no longer working and we are open to supporting the Government to make changes to the student loans system. I believe this Labour Government should make student loan reform a priority to support young people into better futures. It’s putting too many young people off studying and going further; it’s making university even more elitist and unachievable for too many whilst also making those who took the decision to attend feel a great sense of regret. All this simply cannot be right.
It is, therefore, deeply disappointing this current Government has made it clear that fixing it is not a priority for them. Instead, Ministers are making the system even worse by freezing the repayment thresholds. The Official Opposition plan to fix this - our New Deal for Young People -will scrap real interest on student loans, end dead-end degrees and double apprenticeships, so that every young person has a genuine choice at 18. As the Shadow Education Secretary, Rt Hon Laura Trott MP, has said, the Opposition stands ready to work with the Prime Minister to make this happen.
I understand the Government has said it will publish an equalities impact assessment, "including the impact on lifetime repayments, alongside other borrower impacts for the Plan 2 repayment threshold and interest threshold freeze". My Conservative colleagues have pressed Ministers for further details about when this will be released. Please be assured I will continue to follow this closely on behalf of my constituents. We need to fix this and bring a sense of fairness which has undoubtedly been lost in this failure of the system, this disappointing process which is now badly affecting lives and stifling futures.
