Starmer promises to look at making student loans ‘fairer’

1 hour agoJennifer McKiernan & Brian WheelerPolitical reporters

BBC/ UK Parliament

Sir Keir Starmer has told MPs he would “look at ways” to make the student loans system in England “fairer”.

The promise follows an attack by Conservative leader Kemi Badenoch, who said the system was “at breaking point” and had become a “debt trap” for graduates.

Sir Keir also faced calls to reform the system in England in an earlier parliamentary debate with MPs criticising “rip-off” interest rates and unfair changes to repayment terms.

Campaigners have called for changes to the system, after Chancellor Rachel Reeves announced last year that the salary threshold at which some student loans must be paid back in England

Student loans include money the government lends to cover the cost of university or college course tuition fees, capped at £9,535 in England and Wales for this academic year.

It needs to be repaid with interest once the graduate earns over a set threshold.

The chancellor announced plans to freeze that threshold

The Conservatives have said they would cap interest rates for some loans at the Retail Price Index (RPI) instead of higher commercial rates if elected.

At Prime Minister’s Questions, Badenoch asked Sir Keir to cut interest rates on student loans now, saying: “The system is now at breaking point for graduates.

“I believe student loans have become a debt trap,” she added.

Sir Keir replied: “I’m glad to learn that the leader of the opposition has finally admitted that they scammed the country on this, and that applies to everything they did in government.

“We inherited their broken student loans system. We’ve already introduced maintenance grants to improve the situation, which they scrapped, and we will look at ways to make it fairer.”

The prime minister said other economic improvements would also support students, including the news the average energy bill would be £117 lower this year.

“We promised to cut the cost of living. We are cutting the cost of living,” he said.

Badenoch attacked Sir Keir again over his promise in the 2020 Labour leadership election that he would abolish tuition fees if he took over the reins from Jeremy Corbyn.

“For the record energy bills are still higher than when he came into office,” she noted.

Some graduates have told the BBC they have cut their hours at work in order to reduce their salaries to under the repayment threshold.

Earlier on Wednesday, more than 20 Labour MPs spoke during a debate in Westminster Hall to call for changes to the student loan system in England, criticising “rip-off” interest rates and unfair changes to repayment terms.

Several criticised the decision to freeze thresholds as “moving the goal posts” and changing the terms of loans retrospectively, and Bell Ribeiro-Addy, the Labour MP for Clapham and Brixton Hill, compared the terms of student loans “to something that a loan shark would offer”.

The Rethink Repayment campaign is calling for interest on the loans to be capped at the lower Consumer Prices Index (CPI) measure of inflation, a lower repayment rate of 5%, and a reversal of the threshold freezes.

The Liberal Democrats have also called for an overhaul of the student finance system, including writing off some debt after 10 years of public service for nurses, police and teachers.

However, freezing the repayment threshold was defended by Education Secretary Bridget Phillipson, who told BBC Breakfast that the average graduate would only pay back £8 more a month.

And, asked if the government was considering cutting interest on student loans or freezing thresholds, the prime minister’s official spokesman said the government was keeping things under review.

He said “work continues” on the matter but declined to give any more details or a timeframe, saying “we’ll update when we have one”.

Referring back to Phillipson’s comments, he said the government was looking at ways it might be able to make Plan 2 student loans “fairer”, and when asked whether it could be brought up by the Chancellor next week, he added: “I won’t get ahead of the spring statement.”

Speaking after PMQs, Badenoch’s spokesman said the Conservatives have fully-costed proposals to cut interest rates on some loans but are not ruling out also backing a threshold freeze.

“We are looking at more but we are not going to announce anything until it is fully costed,” he said.

“What we want to see is the debt burden lifted and graduates given some hope because at the moment they are drowning in debt and a lack of job opportunities.”

Under devolved education systems, Northern Irish students pay about half the amount of tuition fees of those in England and Wales, and most Scottish students do not pay any tuition fees.

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