Government will ‘look at’ Plan 2 student loans, Education Secretary says

The Education Secretary has said she will “look at” Plan 2 student loans amid widespread concerns over repayment costs, but refused to commit to changing the system.

Bridget Phillipson insisted she wanted “fairer” arrangements for graduates but warned that the Government was dealing with “a question of priorities” when asked whether the burden would be eased.

Following Chancellor Rachel Reeves’ November budget, the salary threshold at which repayments kick in under the Plan 2 system will be frozen at £29,385 for three years, leading to many having to pay more.

Interest on these loans is charged at the rate of Retail Prices Index (RPI) inflation plus up to 3%, depending on how much a graduate earns.

The Tories have pledged to limit this to RPI only while cutting the number of university entrants and increasing apprenticeships, in a move that will heap further pressure on the Treasury.

Speaking to broadcasters on Sunday, Ms Phillipson said it was “galling that the very people who designed, implemented and delivered that system are now complaining about the fundamental problems that they see within it”.

She also hit out at suggestions to reduce the number of people entering university, which she said were coming from those who “had the benefits of a university education” themselves and wanted to deny it to others.

“I’m not in the business of pulling up the drawbridge behind me and saying to other young people who are ambitious, who want a chance to go to university, that they’re going on  to study on poor-quality courses,” Ms Phillipson said.

Asked whether the Government would change the Plan 2 system, over which critics have accused the Treasury of acting like a “loan shark”, she told the BBC’s Sunday With Laura Kuenssberg: “I will look at it, of course I will.”

Ms Phillipson insisted that graduates in their 30s were being supported in other ways, citing an expansion in free childcare, a freeze on rail fares and “investment in housing”.

Challenged on whether the Government would ease the repayments specifically, she told Sky News’ Sunday Morning Trevor Phillips: “I get the problem. I see the issue.

“In reality as a Government, you have to look at a question of priorities, and what you can do and how fast you can do it, and given the shape of what we have in the public finances this is really hard.”

Shadow education secretary Laura Trott said the Tories wanted funding to be scrapped for “dead-end university courses”, which she said were leaving graduates with weaker job prospects.

Under Conservative plans, young people starting their first full-time job would also see the first £5,000 of national insurance they pay put into a personal savings account, which could be used to buy a home, the party says.

Tory leader Kemi Badenoch said: “Plan 2 student loans are an unfair debt trap: millions of graduates are doing the right thing, paying every month, yet watching the balance they owe growing bigger because interest piles on faster than repayments.

“If Labour had any sense, Rachel Reeves would act now and use her spring statement to adopt this plan.”

The Liberal Democrats, who along with the Tories lifted the cap on tuition fees and introduced the Plan 2 system during the Conservative-led coalition government in the 2010s, have also pledged to cut costs.

The party has called for the threshold freeze to be scrapped and for the creation of a royal commission to consider longer-term changes, including replacing RPI with a “fairer” rate.

Lib Dem universities spokesman Ian Sollom said: “My party paid a heavy price for making promises on tuition fees that we couldn’t keep.

“We’ve learned from that, which is why today we’re setting out a proposal that is pragmatic, deliverable, and would make a real difference.

“But the system also needs fundamental reform that lasts beyond any single parliament.”