How student debt became a political minefield

New graduates start their careers with an average debt of £53,000, including the angry young MPs now pushing for a broken system to be rethought. Can Labour find the path to a solution?

- Rachel Sylvester Political editor

Last Wednesday, protesters wearing shark costumes and Rachel Reeves masks gathered outside the House of Commons to raise the alarm about the student loan system.

Members of the National Union of Students (NUS) waved placards denouncing the chancellor as a “loan shark” and “Ripoff Reeves”, after her budget decision last November to freeze the salary threshold at which some repayments start. Like those who borrow from unregulated lenders, millions of graduates have suddenly found the terms of their loans revised unilaterally and retrospectively.

The backlash over a finance system that has left many overwhelmed by ballooning debt is growing. Alex Stanley, the NUS vice-president for higher education, said student loans “have been mis-sold” and that “a broken system” has been entrenched by successive governments: “This is a generation who are already struggling to pay the bills, let alone have a conversation about taking out a mortgage or starting a family.”

People leaving university now start their working lives with average debts of £53,000. Graduates do not start to repay the loan until their income reaches a certain level, and the debt is written off after 30 or 40 years, depending on the plan, but for those saddled with repayments, the system is daunting. A typical graduate in their 20s and early 30s has to earn at least £66,000 a year before they start seeing their debt shrink.

Last month, the personal finance expert Martin Lewis urged the chancellor to rethink her decision to freeze the threshold at which plan 2 student loans start to be paid back at £29,385 for three years starting in April 2027. He said it was “not a moral thing” and the government had signed “a contract” with young people.

Reeves insisted the measures were “fair and proportionate” and the government was getting “the balance right between tax and spending”. But the row over the funding of higher education is rapidly turning into a political minefield.