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The head of the union representing students has told PoliticsHome that she believes the government could U-turn on its decision to freeze the threshold at which graduates start to pay back their student loans amid outrage over the step.
The president of the National Union of Students UK (NUS), Amira Campbell, said it would be “very difficult” for the Labour government to “ignore” the growing debate as it risks joining the list of “many things that really put their re-election at risk”.
The current student loan system was created under the Conservative government. The issue has exploded into life in recent weeks, however, after Chancellor Rachel Reeves insisted that her decision at the November Budget to freeze the threshold at which ‘Plan Two’ graduates start to pay back their loans was “fair and reasonable”.
Martin Lewis, the TV personal finance expert, said it was “not a moral thing” to do because it was essentially treating debt like tax, urging the government to “please have a rethink”.
Meanwhile, people in the Plan 2 cohort have posted online about how they owe more money now than they did when they graduated, fuelling cross-party calls for a fairer system.
Under the Plan Two agreement, graduates are charged interest on loan repayments equal to Retail Prices Index (RPI) plus up to three percentage points. However, monthly repayments often do not meet interest, leaving many graduates with debt larger than what they originally borrowed, years after leaving university.
PoliticsHome reported last week that Reform UK, the Conservatives and the Liberal Democrats were all looking at how the system can be changed as part of their policy work, while Labour MPs have had discussions with sympathetic ministers about what can be done to address the perceived unfairness.
Justine Greening, the former Tory education secretary, said Kemi Badenoch’s party should “lead” on the issue of student loans to help rebuild support with young people.
In an interview with PoliticsHome, Campbell said she is confident that “with the right amount of pressure, on a very small basis, we can see a U-turn on this freezing of the threshold specifically”.
“It just took enough people saying the same thing at the same time for it to suddenly build up legs,” she said.
“Everything aligned at the right moment. But also, that’s reflective of the fact that we’ve hit this point in time where the people who were the first generation of Plan Two loans… they’re now all 10 years into their careers, facing the worst moment of this loan.”
“There’s a clear political will and reasoning to do it.”
Notably, the 2024 general election saw a significant number of MPs on Plan 2 deals elected to Parliament, which is seen as having helped the issue gain traction in Westminster.
“I recognise that there are backbench MPs who are affected by this, and that’s helping,” she said. “That’s helping with pushing the fight. But broadly, the thing that’s going to take this over will be the wider political pressure that the Labour government are being put under.”
According to the NUS president, the student loans debate is part of a wider sense of intergenerational unfairness that is increasingly important to British politics. She said the country is “going to end up with generations of families where both their parents and the kids are paying off loans whilst the parent is still supporting their kid at university”.
“We’re trapping ourselves into a really bad cycle where essentially no one ever pays off their university loans.”
While much of the recent debate over student loans has focused on the changes around Plan Two, Campbell is also concerned about the long-term ramifications of the Plan Five loan, first introduced in England in 2023.
The Plan Five loan differs from its predecessor, Plan Two, in that it has a generally lower interest rate, but a longer repayment period of 40 years before the debt is wiped out.
“We’re basically talking about people who are close to retirement, still paying off their student loan,” she told PoliticsHome.
The NUS took its campaign to Westminster last week, gathering outside Parliament dressed in shark costumes and wearing Reeves face masks. Campbell said there was “a very serious message behind all of that”: “We’re seeing food bank usage for students double, we’re seeing parents from poorer backgrounds really struggle to support their child through education.”
A government spokesperson told PoliticsHome: “We inherited the student loans system, including Plan Two, which was devised by the previous government.
“Threshold freezes have been introduced to protect taxpayers and students now, alongside future generations of learners and workers. The student finance system protects lower-earning graduates, with repayments determined by incomes and outstanding loans and interest being cancelled at the end of repayment terms.”
They added that the Labour government had reintroduced targeted maintenance grants to support its target of two-thirds of young people taking a gold standard apprenticeship, higher training or heading to university by the age of 25.
The spokesperson continued: “This is all alongside our ongoing support for working people starting off in life, as we build 1.5m new homes, expanding government-funded childcare, introducing free breakfast clubs and freezing rail fares.”
