Young Labour MPs team up to force chancellor's hand on student debt

An above-inflation increase in loan interest is driving a backbench bid to reform the system - and possibly head off the Greens, writes Catherine Neilan

- Catherine Neilan

The student loan repayment system could result in graduates owing more years after leaving university than they did on finishing.

(Benedek/Getty)

Labour backbenchers are hoping to force a change to the student loans system amid a backlash against the freezing of the repayment threshold - the amount graduates must earn before they start paying back the money in November's budget.

Last week, personal finance expert Martin Lewis attacked Rachel Reeves's decision to freeze the threshold at which plan 2 student loans would start to be paid back at £29,385 for three years, starting in April 2027. It was "not a moral thing", he said. Students pay 9% of their earnings above this figure, so the repayments rise along with their salary.

Those on plan 2 loans - taken out by English and Welsh students who started undergraduate or PGCE courses between 1 September 2012 and 31 July 2023 - face above-inflation interest rate increases. This would result in some people owing more years after leaving university than they did on graduating, despite having paid off thousands of pounds. Lewis urged chancellor Rachel Reeves to "rethink" her plans.

But the chancellor told BBC's