Government ‘looking at making student loans fairer’, says Starmer

Keir Starmer has pledged to look at ways to make student loans fairer after admitting the current system isn’t working.

Speaking in parliament on 25 February, the prime minister said the government had “inherited” the Conservative Party’s “broken student loans system”. 

“We’ve already introduced maintenance grants to improve the situation, which they scrapped, and we will look at ways to make it fairer and we will do other things within the economy to help students,” Starmer said at Prime Minister’s Questions.

New maintenance grants of £1,000 per student for those from low-income households taking certain courses are set to come in from 2028-29, funded by a levy on international student fees. 

Pressing the prime minister on whether the government would cut interest rates on student loans, leader of the opposition Kemi Badenoch described the system as a “debt trap”. 

Responding to Starmer’s accusation that the Conservatives had scammed the country by introducing Plan 2 loans, Badenoch said: “Policies that may have been fine for 2012 with low interest rates are not fine for 2026. The fact is, graduates are paying more, not less.”

Referring to recent benefit increases, she also accused the government of “taking money out of the pockets of graduates and giving it to people who are not working”. 

“Under their government, student loans thresholds were frozen for 10 years,” Starmer said. “They broke the system and we’re fixing it.”

The prime minister did not provide details on which parts of the system the government was looking at, but reports suggest ministers are debating changing either the interest rate or repayment threshold. Chancellor Rachel Reeves will present her Spring Statement in parliament on 3 March. 

Commenting on Starmer’s pledge, Amira Campbell, president of the National Union of Students, said graduates are “drowning in debt”. 

“MPs across parliament are waking up to the collective anger my generation is feeling, and we are finally being heard,” she continued. 

“We have the ways forward, let’s not waste time with a review. Unfreezing the repayment threshold and changing the interest terms, by both capping interest and changing the rate, would put money back in the pockets of graduates each month and stop this fiscal drag we are feeling.”

In recent days, some Labour politicians have defended the plans to freeze the repayment threshold, first announced in last year’s budget. Speaking to the BBC on 24 February, education secretary Bridget Phillipson said the government was supporting graduates in other ways, including by extending free childcare and freezing rail fares. 

But the government has faced pressure to change the system after other political parties announced their plans to reform it. 

Both the Conservative and Green parties have pledged to cut interest rates on these loans, while the Liberal Democrats suggested some public sector workers should have their debt written off after 10 years of service. 

Reform UK has previously said it will stop charging interest on student loans altogether and extend the repayment term.

helen.packer@timeshighereducation.com