MPs to look at fairness of student loans system
MPs will examine the fairness of student loans repayment in a new inquiry following increasing debate over the system.
The Treasury Committee is asking young people for their views on things like whether they would still take out loans today and how their student loan repayments are impacting their finances.
Committee chairwoman Dame Meg Hillier said loan interest rates and sometimes high marginal tax rates “have clearly led to widespread dissatisfaction among graduates who may not have fully understood their repayment terms and the possibility they could change”.
“This inquiry is about fairness. Fundamentally, what we’re asking is, have the goalposts been moved in a way which is unfair to graduates?” she said.
Evidence must be submitted to the committee by Tuesday April 14. There will also be a survey for young people to contribute their experience directly.
Questions will include whether the interest on loans should be fixed to the Retail Prices Index (RPI), Consumer Prices Index (CPI), or another measure, and whether the terms of a loan should be able to be changed.
“It’s critical that the model for financing university education is sustainable but there are questions over whether decisions such as freezing the threshold for repayments is placing the burden unfairly on younger people,” Dame Meg said.
At the autumn budget, the Chancellor announced the Plan 2 loan repayment threshold will be frozen at £29,385 for three years, leading to many having to pay more.
Plan 2 loans were issued to English students who started their undergraduate courses between 2012/13 and 2022/23.
The system has been repeatedly criticised recently, including by many Labour MPs, Conservative leader Kemi Badenoch, and consumer champion Martin Lewis.
Interest on Plan 2 loans is charged at the rate of RPI inflation plus up to 3%, depending on how much a graduate earns. The Conservatives have announced plans to restrict this to RPI only.
Mr Lewis has said lowering the interest rate will only help graduates who can clear their loans within 30 years, and that the repayment threshold needs to be increased to help lower and middle earning graduates.
Prime Minister Sir Keir Starmer has said the Government will look at ways to make the student loan system fairer.
Published: by Radio NewsHub