More than 120 MPs and members of the House of Lords have urged the UK government to carry out an urgent review of the student loan repayment system, warning that current rules are placing an excessive financial burden on graduates and discouraging aspiration.
The cross-party appeal was made in an open letter to Chancellor John Healey, coordinated by campaign group Rethink Repayment. Signatories include Conservative shadow education secretary Laura Trott, Liberal Democrat education spokesperson Munira Wilson, and several MPs who are themselves repaying Plan 2 student loans.
The lawmakers argue that successive changes to repayment thresholds, combined with rising interest charges and higher overall tax rates, have left many graduates surrendering a significant share of their income as earnings increase.
The debate has largely focused on Plan 2 student loans, which were issued to students in England between September 2012 and July 2023 and continue to be available in Wales. Under the scheme, graduates repay 9% of earnings above the repayment threshold.
In their letter, the MPs and peers said many middle-income earners receive less than half of the benefit from a pay rise after income tax, National Insurance contributions and student loan repayments are deducted. They called for a repayment framework that is “fair, sustainable and supportive of aspiration.”
A key concern is the government’s decision last November to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030 rather than increasing it in line with inflation. Campaigners argue the freeze will force graduates to begin repayments earlier and pay back more over the lifetime of their loans as salaries rise.
The call follows a recent Treasury Committee inquiry into student loans, which also recommended reversing the threshold freeze. The committee’s report referred to a BBC investigation that found government presentations to prospective students a decade ago compared Plan 2 repayments to a £30-a-month mobile phone contract. The committee said that comparison was inaccurate for higher earners and described it as amounting to “mis-selling.”
Education Secretary Lucy Powell recently acknowledged concerns over the system, describing the interest rates applied to Plan 2 loans as “egregious” and indicating that reform was among her department’s priorities.
Liberal Democrat MP Tom Gordon, who signed the letter, said he expected his own student debt to remain unpaid until it is written off after 30 years under the current rules, despite earning an MP’s salary. He questioned how lower-income graduates could realistically expect to clear their debts if higher earners struggled to do so.
Gordon also criticized retrospective changes to repayment conditions, arguing that governments had altered loan terms after students had already committed to borrowing, something he said would not be permitted for commercial lenders.
Oliver Gardner, founder of Rethink Repayment, said the growing support across political parties demonstrated that concerns over student loans were no longer a partisan issue. A Department for Education spokesperson said the government recognized flaws in the existing system and was considering its response to the Treasury Committee’s recommendations as it explores reforms aimed at making student finance fairer for graduates.
