Monthly payments switch mooted as part of student loans shake-up

Campaigners are pushing for reforms to the UK’s student loan system that would see payments made monthly instead of every term.

Backbench Labour MP Luke Charters has tabled a new bill in the House of Commons seeking to transform the “Frankenstein’s monster” of the student loan system.

The Student Finance (Review of Payment Schedules) Bill was voted through its first reading in the House of Commons on 7 January, after receiving the backing of the National Union of Students (NUS) and several students’ unions.

Charters told MPs that maintenance loan payments do not line up with the reality of students’ lives.

“Rent and bills are due monthly but student finance arrives in infrequent, uneven chunks, forcing students to budget against uncertainty or rely on overdrafts simply to get by.

“The system assumes a level of financial resilience that many students simply do not have.”

Charters compared the current system to receiving four months of salary at once – a situation that is particularly difficult for young people still learning “essential budgeting skills”.

“The termly payment schedule fuels cash flow challenges, leading to students maxing out overdraft, creating problem debt, and pushing students to other forms of credit simply to get by.”

The MP for York Outer, who was elected in July 2024, said a monthly payment schedule would come at no extra cost to the system and would be a “no-brainer”.

“Not only would it give students greater financial stability, reduce stress, but it would better reflect the world of work once students leave uni and start getting their first full-time payslips.”

The bill also proposes to fix the “needlessly complex” repayment plans that graduates face, including charging higher interest rates to those who earn higher salaries.

“The result is a system that adds stress during study, confusion after graduation, and long-term financial insecurity for an entire generation,” he added.

Even though the bill, which has secured a second reading on 16 January, is unlikely to become law without the backing of government, student groups are hoping it will help propel their campaign into the spotlight. 

In a statement, NUS president Amira Campbell said student finance was in “dire need of reform” and a review into the payment plan was a great place to start.

“If paired with measures to address the financial challenges students are facing right now, such as rent controls or maintenance grant uplift, we’d support a move towards monthly payments which would enable students to more accurately budget their income, particularly over the summer when bills still come in but income doesn’t.

“For university to be accessible to all, the student finance system must function and genuinely support all students. To achieve this, we do need full reform. Students shouldn’t be pushed into poverty while trying to invest in their future.”

patrick.jack@timeshighereducation.com