More than 120 MPs and peers, coordinated by Rethink Repayment, have called on Chancellor John Healey for an urgent review of student loan repayments, arguing the system places an "unsustainable burden" on younger workers. The debate has focused on Plan 2 loans — repaid at 9% above a threshold — after the government froze the threshold at £29,385 for 2027–2030. Campaigners and the Treasury Select Committee say the freeze and high interest rates risk earlier and larger repayments and have called for reform.
Over 120 MPs and Peers Demand Urgent Review of Student Loan Repayments as Plan 2 Threshold Freeze Sparks Outcry
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More than 120 MPs and peers have written to Chancellor John Healey urging an urgent review of the UK student loan repayment system, saying current arrangements place an "unsustainable burden on the next generation of workers." The open letter, coordinated by the campaign group Rethink Repayment, includes signatories from across the political spectrum and highlights particular concern about Plan 2 loans.
Education Secretary Lucy Powell described the interest rate on Plan 2 loans as "egregious" and said the issue is at the top of her in-tray. Several signatories themselves hold Plan 2 loans, which has focused public attention on how the scheme operates and on recent government changes.
What Is Plan 2 and Why It Matters
Plan 2 loans were issued to students in England between September 2012 and July 2023 and continue to be issued in Wales. Under the scheme graduates repay 9% of earnings above the repayment threshold. Campaigners say that changes to repayment thresholds, rising interest rates, and the interaction with income tax and national insurance mean many middle-income graduates see little benefit from pay rises.
The letter criticises "successive governments' adjustments to repayment thresholds – together with high interest and marginal tax rates –" and argues these factors are "placing an unsustainable burden on the next generation of workers." It warns many middle earners "see less than half of any hard-earned pay rise due to a combination of income tax, national insurance and student loan repayments."
Threshold Freeze and Expected Impact
The letter refers to a decision taken last November by then-chancellor Rachel Reeves to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030 rather than allowing it to rise with inflation. Campaigners say the freeze will cause graduates to begin repaying sooner and make larger repayments as their salaries increase. The Treasury Select Committee has echoed calls for that decision to be reversed in its inquiry report.
"If someone earning an MP's salary still isn't likely to repay their student loan in full, what chance does someone on a much lower income have?" said Tom Gordon, Liberal Democrat MP for Harrogate and Knaresborough.
The committee's report also referenced a BBC investigation that found earlier government presentations compared Plan 2 repayments to "£30-a-month" phone contracts when promoting the scheme to teenagers. The report described that comparison as "inaccurate for higher earners" and said it "amounted to mis-selling."
Oliver Gardner, founder of Rethink Repayment, said the cross-party letter demonstrated that "the student loans crisis" is not a partisan issue and called for a fairer system that relieves graduates of excessive debt burdens.
A Department for Education spokesperson responded: "We know the system we inherited is broken and unfair, and some graduates feel the weight of this more strongly. We want to make sure the student loans system works better for everyone and are considering our response to the Treasury Committee's inquiry."
Key facts: Plan 2 loans carry a 9% repayment on earnings above the threshold; the freeze sets the threshold at £29,385 between 2027 and 2030; under current rules many loans are written off after 30 years if not repaid in full.
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