Powell says student loan system at top of in-tray
BBC News 2026-07-28 14:50:02
Context: New UK Education Secretary Lucy Powell has prioritized reforming the student loan system, describing it as a "real cost-of-living issue" for young people. Powell, Labour's deputy leader, has expressed concerns about the high interest rates and repayment thresholds for graduates with Plan 2 loans. The issue has sparked controversy, with campaigners calling for changes to the system.
Key Facts
- Plan 2 loans were taken out by students in England between September 2012 and July 2023, and are still issued in Wales, with graduates paying back what they earn above the repayment threshold at a rate of 9%.
- In November last year, then-Chancellor Rachel Reeves froze the repayment threshold for students with Plan 2 loans at £29,385 between 2027 and 2030, instead of rising with inflation.
- The interest rate on Plan 2 loans is currently set at RPI (retail prices index) plus 3%, which Powell described as "egregious" and a "real cost-of-living issue" for young people.
- Powell's own eldest child has a Plan 2 loan, and she stated that she is "very familiar" with the issue and committed to reviewing it to ensure fairness for students.
- MPs on the Treasury Committee recently criticized the government's comparison of student loan repayments to phone contracts or cinema tickets, describing it as "mis-selling" and calling for a review of the system.