Under-fire Reeves makes new announcement ‘as payments to be reduced’ | Personal Finance | Finance
Rachel Reeves has vowed to cut student loan repayments by tackling inflation following widespread concerns about rising costs. Demonstrators gathered outside Parliament on Wednesday to portray the Chancellor, who has come under fire, as a usurer in response to changes that will see loan costs rise for some students.
Speaking to broadcasters, the Chancellor said: “The changes I made to the Budget froze the repayment threshold for Schedule 2 student loans and we have frozen that for a number of years. “This has been done in the past, but we are also reducing inflation and of course the interest people pay on student loans is linked to inflation.
“Inflation peaked at over 11 per cent under the previous government, which increased the cost of student loans. But by lowering inflation we can also reduce interest on student loans, and I think that will make a big difference in making this more affordable.”
The Chancellor announced in the November budget that the salary threshold which determines when graduates of Schedule 2 loans must start repaying them will be frozen at £29,385 for three years, meaning many people will face higher payments. Plan 2 loans are charged interest based on the Retail Price Index inflation rate plus up to 3% of the graduate’s earnings.
Ms Reeves later defended the system as “fair” and “reasonable” following criticism of the move. Asked by a caller during a phone call to LBC whether she agreed with the Chancellor’s assessment, Ms Powell described student loans as “a sort of graduation tax” and added that many people were struggling to make progress on paying off their debt.
“To be fair, what Rachel was probably talking about overall was more like: Is it fair for graduates to contribute to their education? Because frankly, as graduates, we generally make a lot more money over our lifetimes.
“I think the general principle is fair, but I certainly accept that there are problems around this scheme too, and plus 3% in particular is very bad in my humble opinion.”
NUS chief executive Amira Campbell said the Chancellor should seek solutions to a system “in need of serious overhaul”, such as capping interest rates.
“The current student loan system is freezing our future,” he said. “How can graduates try to build our professional lives when the chancellor is acting like a loan shark, taking hundreds of dollars a month from our paychecks, while interest rates are rising even faster? Is this the reward we get for taking their advice and investing in our future?”
