Thank you to those constituents who have contacted me about student loans. I understand why many people, especially those on Plan 2 loans, feel strongly about how the current system works. Plan 2 loans were introduced by previous Governments, and Labour MPs raised concerns about their design at the time. Given the pressure it places on graduates, this is not a system the current Government would have chosen.
As soon as this Government took office, it recognised the strain on Plan 2 borrowers. The repayment threshold was increased in 2025 and again this year, rising to £29,385. This means graduates now start repaying only once they earn above a level higher than the average graduate salary three years after finishing their course. These two increases in two years match the number of increases made in the twelve years after Plan 2 was first introduced, during which thresholds were frozen for a decade.
Because of the significant pressure on public finances and the need to ensure fairness across the education system, including further education, the Government announced at the Budget that the repayment threshold will be frozen at £29,385 for three years from April 2027. This is intended to help maintain the long term sustainability of the student loan system. England’s student finance system is heavily subsidised, and lower-earning graduates will always be protected, with any outstanding loan and interest cancelled at the end of the repayment term.
I welcome the Government’s commitment to publishing an equalities impact assessment so we can understand how the decision to freeze thresholds affects different groups, and I look forward to seeing its findings.
I am also pleased that the Government has decided to cap the maximum interest rate for Plan 2 and Plan 3 (postgraduate) loans at 6% for the 2026/27 academic year. Global events, including the conflict in the Middle East, are creating uncertainty, and this cap ensures graduates are not penalised for a war in which the UK has no direct involvement. This is an important step in supporting those most exposed within an already unfair system.
More broadly, I support the return of maintenance grants for students, and I welcome the Government’s commitment to reviewing the Plan 2 system it inherited, as well as the wider student finance system, to make it fairer for students, graduates, and taxpayers.
Thank you once again for contacting me about this important issue.
Best wishes
Rt Hon Hilary Benn
MP for Leeds South
Secretary of State for Northern Ireland
[email protected] l www.hilarybennmp.com l X @hilarybennmp