A UK minister has defended changes to student loans as criticism mounts. Labour Party minister Lucy Rigby has told MPs the heavily subsidised system gives the government the right to alter terms of existing agreements.
Minister's Defence
Ms Rigby told MPs on Wednesday that less than half of young people go to university, and the government had to bear in mind "fairness to taxpayers as a whole". She said that, for most people who want to go to university, "you couldn't get a commercial loan because you don't have the credit history, you don't have the collateral, you certainly wouldn't be able to get something which you could write off if you don't hit certain repayment thresholds".
She added: "Student loans, despite having the name they have, are really very, very different as a product … to a commercial loan. Because they are so heavily subsidised by the government, the government has the right … to change some of those terms of the loan."
MPs Inquiry Launched
It comes as an inquiry by MPs into the student loan system in England has begun, with evidence from student organisations and experts. The National Union of Students (NUS) said the inquiry should look at the graduate earnings repayment threshold and interest rates. The Treasury Select Committee of MPs will hear the concerns of graduates about the size of their debts, and the interest rates.
Among those most worried are graduates who took out what are called Plan 2 loans between 2012 and 2023. More than 50,000 people have submitted written evidence to MPs, with many graduates saying they did not understand the terms of their student loans when they signed up.
Repayment Threshold Freeze
Graduates in England repay 9% of whatever they earn over a threshold, which is due to be frozen at £29,385 from April 2027 for three years - with the result that more graduates will start repaying earlier.
Government Response
Last week, a government spokesperson said: "We recognise that some graduates have concerns about the cost of student loan repayments and understand why this is an important issue. We inherited the current system and have taken steps to make it fairer – including raising the repayment threshold for the first time since 2021 and capping maximum interest rates this year to protect graduates from rising costs." The spokesperson said the government had reintroduced targeted maintenance grants, adding that the system "protects lower-earning graduates", with repayments linked to income and any outstanding balance and interest written off at the end of the loan term.
