Martin Lewis gatecrashes Badenoch interview on student debt and brands loans system a ‘mess’
Money expert Martin Lewis clashed with Conservative leader Kemi Badenoch over the student loans system after she walked onto the set during his live interview on ITV.
During a conversation on the subject Good morning England Mr Lewis, who appears regularly on the show, intervened to express disagreement over Conservative plans to cut interest rates on some student loans.
Mr Lewis told Ms Badenoch: “If you want to help middle-income students, the most important thing is that the repayment threshold needs to be increased.”
The Conservative leader responded: “I’m not even the first person to try to solve this problem… I want to make sure that young people who pay and pay and whose debts don’t go down get some relief.
“If you think there’s a better offer, let’s take a look… the student loan system isn’t working properly; someone has to do something.”
Mr. Lewis replied: “Since interest is already added to many student loans, lowering the interest rate will only help those who can clear their loans within 30 years, meaning low- and moderate-income graduates will not benefit from this change.”
The interaction took place before his appearance on the show, where the consumer champion described the student loans system as a “nightmare” and a “mess.”
Mr Lewis focused on the controversial Schedule 2 loans, arguing that changes had been made to the loans and that if a commercial company tried to do so they would be struck down by the regulator.
Following Chancellor Rachel Reeves’ November budget, the salary threshold at which repayments start under the Plan 2 system will be frozen for three years, leaving some people having to pay more.
Borrowers pay nine per cent of their income into loan repayments from April after graduation above the repayment threshold, which is currently £28,470.
In the autumn budget the government announced that the repayment threshold for Schedule 2 loans will be frozen at the April 2026 level (£29,385) for three years, rather than rising with inflation. Interest thresholds that determine how much interest is added to loans will be frozen for three years.
Speaking about Plan 2 loans, which are given to people starting university in England and Wales from 2012 to 2023, Lewis said: “When they were initially given they were told that they would increase every year above the repayment threshold, which is nine per cent of what you paid in. That’s what students were told.
“What the Chancellor has now done by freezing the repayment threshold is a unilateral breach of contract. He is changing the contract in a way that negatively affects students or graduates; no trading company will be allowed to do this and the regulator, the FCA (Financial Conduct Authority) will cancel it.”
Mr Lewis added: “The big problem with this is that it is regressive. Because low- and middle-income graduates will pay more every year for 30 years and get nothing out of it. “Higher-income graduates will pay more every year until their loans are paid off, so the interest they pay will also decrease.
“Structurally this is terrible, it is a breach of contract, it is immoral. Chancellor, you need to reverse this decision and give students what they were promised. The threshold needs to be raised along with average earnings.”
“If you want (students) to benefit, you either have to reduce their actual debt, reduce their debt, that makes a difference and still be a little bit regressive… or you dramatically raise the repayment threshold, which is what hurts people, it takes too much money out of pocket in the middle of a cost-of-living crisis.”
Mr Lewis added: “And for the Schedule 5 loans, the new loans that students are now taking out, the repayment threshold is not set at much above the minimum wage… the system is a nightmare, a mess.”
Interest on Plan 2 loans is charged at RPI (retail price index) inflation plus three per cent, depending on how much the graduate earns. The Conservatives have announced plans to limit this to the RPI only.
In early February, the National Union of Students (NUS) met in Westminster to call on the Chancellor to reverse his decision to freeze the repayment threshold for Schedule 2 student loans.
NUS chief executive Amira Campbell has previously said the Chancellor should seek a solution to a system “in serious need of overhaul”.
