Starmer pledges change to ‘broken’ student loans system amid mounting pressure
Sir Keir Starmer has pledged to help students, telling MPs he will explore ways to improve the fairness of the student loan system.
It comes as the Prime Minister’s official spokesman suggested ministers could consider cutting interest rates and adjusting the repayment threshold on student loans.
During Prime Minister’s Questions the Labor leader directly blamed the rising costs of student loans on the Conservative government, following questioning from Kemi Badenoch.
The Conservative leader has previously pledged to reduce interest paid on certain student loans due to widespread concerns about spending.
Following the November budget presented by Chancellor Rachel Reeves, the salary threshold at which loan repayments begin will be frozen at £29,385 for three years; This decision is expected to lead to increased payments for many graduates.
Interest on Plan 2 loans is charged at up to RPI inflation plus 3 per cent, depending on how much the graduate earns.
Ms Badenoch announced plans to limit this to RPI only, saying this would help more graduates pay off their debt.
Sir Keir’s spokesman suggested ministers may be examining changes to thresholds and interest rates, stressing they were keeping “under review the ways we can make life better for graduates” when pressure is put on both elements.
“The system is now at breaking point for graduates, I believe student loans have become a debt trap,” Ms Badenoch told the House of Commons.
He pressured the Prime Minister to reduce interest rates on student loans.
Sir Keir replied: “I must say I am pleased to hear that the leader of the Opposition has finally admitted that he defrauded the country on this issue and that this applies to everything they do in government.
“We inherited their broken student loan system. We’ve already offered maintenance grants to try to improve the situation, but they said we’re going to look at ways to make it more equitable and do other things within the economy to help students.”
Ms Badenoch went on to ask whether graduates were paid more or less under Labour, but Sir Keir did not answer this directly.
He said that under the previous government, “inflation was at 11% and as loan interest rates increased, it disrupted the financial situation of students”.
Ms Badenoch said: “The reality is that graduates pay more, not less.”
He accused Sir Keir of “taking away from students and giving them to Benefit Street”.
Sir Keir replied: “How frustrating.
“During their government, student loan thresholds were frozen for 10 years, 10 years.
“They broke the system, they did it while they were in coalition with one guy there, and we’re fixing it.”
Ms Badenoch continued to press the Prime Minister to roll back changes to student loans in his spring statement next week.
Sir Keir’s spokesman later told reporters: “I will not get in the way of the spring statement” when asked whether he would include the issue.
The official said “work is ongoing” on the issue but declined to give further details or a time frame, saying, “We will update when we have it.”
Consumer champion Martin Lewis also called on the Chancellor to reverse his decision on student loans.
Appearing on ITV’s Good Morning Britain on Monday, he said the changes would be struck down by the regulator if a commercial company tried to make them.
“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 increase with average earnings,” he said.
Ms Badenoch and Mr Lewis will meet to discuss student loans on Wednesday afternoon, following a heated exchange on the issue on Monday’s TV programme.
Ms Badenoch’s spokesman insisted the Conservative Party was not doing this “for electoral maths” to persuade graduates to vote for the party.
He added: “We’re doing this because it’s an obvious problem and we have a completely cost-effective solution.”
