Where do UK parties stand on the student debt debate?

Hello and welcome back to The Student Eye, a publication for university students and those interested in higher education across the UK.

This week, we bring you a digestible breakdown of where the major political parties in the United Kingdom stand in the student debt debate.

We hope you enjoy this week’s edition of The Student Eye, and please share with anyone who may be interested!

The changes to Plan 2 student loans were set out back in the November Budget, when Chancellor Reeves defended the student loan system as “fair and reasonable”.

Reeves said that interest fees will decrease as inflation drops, meaning Labour are actually helping graduates. Inflation rates have fallen over the past twelve months. They still remain over one per cent above the Bank of England’s two per cent target and last week’s Spring Statement forecasts suggested they would take longer than previously expected to reach target. That was before rising oil prices as a result of war in the Middle East.

A growing number of Labour MPs have been vocal in their criticism of the Plan 2 system, including deputy leader Lucy Powell who described it as “unfair” and “egregious”. Following cross-party pressure, as well as public outcry, Starmer has now promised to make student loans fairer. The details of this plan remain opaque.

The New Statesman reported that Labour backbenchers are preparing a campaign on student loans, with one Labour MP remarking that “the Pandora’s box is open”. The group is reportedly working with think tanks to “develop a policy proposal for the reform of the student loans system intended for presentation to ministers”.

The Good Growth Foundation – a think tank founded by the former Labour parliamentary candidate in Islington North, Praful Nargund, has been speaking to members of the PLP and the Treasury to explore the potential costs and impacts of different options, including:

• Raising the repayment threshold

• Extending the repayment window

• Cutting the repayment rate

• A one off interest write-off.

“Several Labour MPs – some of whom are themselves on Plan 2 loans – have been privately agitating behind the scenes, telling the government that without fast act it could be outflanked by other parties on this issue. This argument was intensified by the success of the Green Party in the Gorton and Denton by-election. One Labour MP speculated that the graduate contingent of the party’s core base could be endangered by the Green Party’s victory”.

The New Stateman’s reporting by Megan Kenyon is worth a read.

The Conservatives have promised that they would cut the rate of interest charged on some Plan 2 student loans. Kemi Badenoch described the loans, which were issued in between 2012 and 2023 and taken out by 5.8 million students, as “increasingly feel[ing] like a scam”.

Badenoch said that she would cap the interest charged on student loans to Retail Prices Index (RPI) only, which is currently 3.8%. Currently, interest is charged at the rate of RPI plus up to 3%, depending on graduate salary.

The coalition government introduced Plan 2 loans in 2012 and tripled tuition fees to up to £9,000 a year.

Also in this space, Tories have also revisited the burden of “Mickey Mouse” degrees. Shadow education secretary Laura Trott said last week that the Conservatives would “stop the Government funding dead-end university courses”. Courses in the arts are often regarded as “Mickey Mouse” degrees and graduates of such courses are less likely to pay off their student debt.

The Conservatives have also pointed towards an overhaul of the higher education system more broadly, including tackling “unfair” student debt.

The Liberal Democrats called on the government to scrap plans to freeze repayment thresholds and set out wider proposals for reforming student finance.

Lib Dem plans would see public sector workers like nurses, doctors and teachers having their debt written off after ten years of public service, and the introduction of an independent body to “protect graduates from retrospective changes”.

They said that freeze plans should be scrapped altogether and that the repayment threshold should increase in line with average earnings rather than RPI. They claim that, under their own proposals, a typical graduate earning £35,000 per year would have their loan repayments cut by half within three years.

The Liberal Democrats’ U-turn on tuition fee rises following the formation of the coalition with Cameron’s Conservatives in 2010 has plagued its reputation among young people for over a decade. They say that they learnt their lesson in 2015 and that these plans are more “credible” and “deliverable”.

The Green Party’s manifesto promises to abolish tuition fees entirely. Leader Zach Polanski has expressed recently that he encourages a “conversation about debt forgiveness” due to the perceived unfairness of as system in which graduates leave university with ever-growing debt.

According to a report by the House of Commons Library in December, the value of outstanding loans at the end of March 2025 reached £267 billion. There is little to no detail on how a Polanski-lead government would pay that sum off.

Other than this, it appears that the Greens have said fairly little in the past month on this topic. Whether this is due to them being preoccupied with the Gorton and Denton by-election victory, or because they don’t have to fight as hard for the young vote as other parties, remains to be seen.

Like the Green Party, there has been little from Reform UK on this national conversation. Farage did speak at Davos around a month ago, where he repeated that Tony Blair’s fifty per cent university targets was “lunacy”. He described the repayment system as having been done in a “virtually usury” way, and said that the tax bill of the brightest graduates pushes them to live elsewhere in the world.

Reform’s policy in its 2024 manifesto and media interviews included scrapping interest on loans for university students and scrapping fees for STEM degrees.

REFLECTIONS

We have covered this debate in recent weeks because, all of a sudden, it is the news of the day. It is worth repeating that there is no new policy here - the announcement loan repayment was made in last year’s budget.

Clearly though, some parties believe that they can win votes here. Every year, the government issues roughly 1.5 million students with a student loan that will average £53,000 by the time their course ends.

As we wrote at the end of January and after the budget, it is very hard to argue that freezing thresholds on loans already issues is fair or reasonable. That being said, the government has very little money to play with at the moment.

U-turns on various tax rises and welfare reform have left it scrounging around to meet commitments it has already made. It seems somewhere on the scale of unlikely to impossible that they will bring meaningful student loan reform in the near future.

Badenoch’s Conservatives say that they are the party of fiscal responsibility once again. That will be a tough sell for young adults who found themselves paying more for university and getting less for their money as a result of choices under previous Tory governments.

As ever, the other parties care little about making a coherent funding argument. If the polls remain the same ahead of an election, that will change very quickly.

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