Tories would scrap ‘debt trap’ of high interest student loans, says Kemi Badenoch | Student finance
Kemi Badenoch has stepped up pressure on Labor ministers to tackle growing anger over high costs, saying the Conservatives will tackle the “unfair debt trap” caused by high interest rates on student loans.
Education Secretary Bridget Phillipson admitted the Scheme 2 loan system had “problems” but suggested the government’s priority would be maintenance grants for poorer students rather than dealing with high interest rates.
He told the BBC: “The reality is that we inherited a system and the Conservatives have left that system behind, the system they are now complaining about. But it has its problems, it does.” “But there are also problems when you try to make changes.”
Conservatives say they will scrap real interest rates on Plan 2 student loans; This could mean graduates will pay tens of thousands of dollars more than they borrowed to finance their college tuition.
Shadow education secretary Laura Trott said loans should not rise faster than RPI inflation; This is a move that will reduce the size of loans for millions of graduates who started courses after 2013.
He said the change would be funded by cutting tens of thousands of university courses that did not provide students with “value for money”.
Conservative leader Badenoch said: “Britain’s young people face a worse deal under Labour.”
“Youth unemployment is at its highest level in a decade, graduate employment is at its lowest level in history and many people are moving directly from education into prosperity.
“Leaving university has become a moment of despair not only for young people but also for parents.
“Schedule 2 student loans, in particular, are an unfair debt trap: Millions of graduates are doing the right thing, making payments every month, only to watch the balance they owe grow larger as interest accumulates faster than repayments.
“If Labor had any sense, Rachel Reeves would act now and use her spring declaration to adopt this plan.”
The debate over the cost of student loans has increased since the Chancellor’s decision last November to freeze the salary threshold for schedule 2 student loan repayments for three years.
Recently, Labor MP Nadia Whittome said she left university in 2019 with a debt of £49,600 and had only had a £1,000 cut in her repayments, despite being in the top 5% of her salaries as an MP.
“If lawmakers can barely pay off their student loan debt after six years of repayments, what chance do other graduates have?” he said.
Phillipson said the salary threshold for repayments would be frozen in coming years, meaning more graduates would have to pay back their loans.
“This is a system that has evolved over many years, that came into existence in 2012-13, it was not a system that we designed.
“There are flaws in this system, I would be the first to admit that, but it is very frustrating that the people who designed, implemented and delivered this system are now complaining about the fundamental problems they see in it, as well as saying university is not for some young people.
“Meanwhile, it always comes from people who go to college and enjoy the benefits of a college education and want to deny that to other young people.”
Trott said “there needs to be a change in the system” and suggested creative arts courses were an example of courses not giving students value for money.
“I’m not going to come here and say it’s not hard, but I think it’s the right thing for young people.
“This means that instead of going into one of these university courses that have negative consequences for them, they can get into a great apprenticeship with no debt and come out with great job opportunities. I think it’s a better trade.”
Treasury secretary Torsten Bell said such a policy would have a disastrous effect on universities.
He wrote in “In this case, they may have coincidentally announced that they would close some of the universities.”
Mel Stride, a source close to the shadow chancellor, said the Conservative party wanted to focus more long-term on rebalancing the economy, particularly towards young people and those paying ultra-marginal taxes.
“There is a palpable sense of injustice and even despair among some people that they have done all the right things and are screwed,” the source said.
“People who go to college, get a decent job, and find themselves facing sometimes ridiculously high marginal tax rates. They pay eye-watering interest on student loans to support others who get low-quality degrees and will never pay them back.”
“In the end, not only is this unfair, but it also translates into really bad economics; people start to think: ‘What’s the point?’ “We need to give people some hope.”
