Student loan architect calls for graduates to pay less interest
One of the architects of the student loan system says interest rates should be lowered as debate over loans intensifies.
Nick Hillman was a special adviser to former universities minister Lord Willetts when tuition fees tripled under the government’s “Plan 2” loans for graduates starting university between 2012 and 2023.
To talkTimesMr Willman admitted the system was created in a “mad rush” in 2010 when the government was under pressure from voters to save money. He said: “We had a general election where all the major political parties promised to exempt some areas of public spending.
“They said, ‘We’re not going to cut pensions, we’re not going to cut defense, and we’re not going to cut science,’ so parts of the government that weren’t protected, and that includes higher education… had to make drastic cuts.”
Under the loans, graduates starting between 2012 and 2023 are charged RPI plus interest of up to 3 per cent, despite the Office for National Statistics (ONS) ruling in 2013 that RPI was “no longer fit for purpose”.
Mr Hillman said Times Radio He said on Sunday it was “sensible” to change interest rates from the Retail Price Index (RPI) to the Consumer Price Index (CPI) and that the RPI was higher than the CPI.
The CPI is the current official measure of inflation for the UK and is used for taxes and benefits.
“Since we designed the system the ONS has said that the RPI should not be used for any government policy. It is a very poor measure of inflation,” he said.
Accordingly Sunday Times, No 10 is in talks with the Treasury and the Department for Education about how to reform the current student loan system.
In November 2025, Chancellor Rachel Reeves announced in her budget that the threshold at which Plan 2 student loans must be repaid will be frozen at £29,385 for three years from April 2027, rather than rising with inflation each year. Graduates begin paying back 9 percent of their income above this threshold.
The freeze means more graduates will start making repayments sooner than they would if the threshold were to rise with inflation.
Last week, a group of graduates dressed as sharks protested outside Parliament and accused the government of acting like “loan sharks”.
Ms Reeves defended the system in January, describing it as “fair and reasonable”.
The Ministry of National Education was contacted for opinion.
