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Student Loans
15 September 2026
Lead MP
Meg Hillier
Hackney South and Shoreditch
Labour (Co-op)
Debate Type
Ministerial Statement
Tags
No tags
Other Contributors: 10
At a Glance
Meg Hillier raised concerns about student loans in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
Government Statement
Meg Hillier announced the Government’s response to the Treasury Committee’s report on the student loans system. The report, which received over 52,000 responses, found that the repayment threshold for student loans has repeatedly been broken and that graduates are now having to pay back far more over their lifetime. The report concluded that the split between the individual and the state should be 50%, but the Government argues that their contribution is already in the region of 35% to 40%. The Government has committed to a 'transformation programme' that will review the pre-application process to produce clear, relatable and trusted guidance that supports better decision making and financial planning. The Government have declined to bring student loans promotional materials in line with the requirements of the Financial Conduct Authority’s consumer duty, based on the fact that these are not commercial loans. The Committee recommended that the use of the retail prices index should end and move to the consumer prices index, but the Government have not made a change. The Government announced a change to freeze the threshold at which payments have to be made by students for two years from April next year, which is a breach of trust to change that threshold and make students stick at a frozen level. The Government have not absolutely said that they will not review the threshold, but it is a matter of intergenerational fairness.
John Glen
Con
Salisbury
Question
I thank the hon. Lady for her clear summation of the Committee’s report. I want to press her on the repayment threshold. She says that in the Government’s response, they have not ruled out reviewing it, but given the relatively modest amount of money and the significant number of young people who would be positively affected, does she think that this should be one of the top priorities for the new Chancellor on 28 October?
Minister reply
I absolutely think it should be a high priority, because this generation is being so severely squeezed. The Government’s response to the Committee said: 'The Government recognises the cost-of-living challenges faced by many graduates, including those with Plan 2 student loans, and understands concerns about the impact of repayment terms on borrowers.' The response says further that the Government 'keep all aspects of the student finance system under review.' This is one change that is very simple to make and relatively cheap.
Question
One of the themes that comes through quite clearly in the report is the complexity of the student finance system and the difficulty that students have in understanding what they will actually pay—that is mis-selling, as I think my hon. Friend described it. Given that the Government appear to accept that the terms are confusing, is it fair that they continue to penalise borrowers who were potentially misled?
Minister reply
One good thing is that the Government have recognised that problem in their response to us. We are dealing with mostly teenagers under the age of 18. Sometimes those going to university for the first time do not have other people around them who can advise them about the impact of a loan, and many have no choice and have to take out a loan. The cohort now paying back under plan 2 is being further penalised by the threshold change, so more and more is being layered on that particular cohort. There needs to be more fairness in the system.
Question
I speak as the mother of three students, one of whom has just graduated. Two of them have a plan 2 loan, and one has a plan 5 loan. They and I were unaware that they are not allowed to start repaying their debt until they graduate, yet the interest starts from the very first day that they take the loan, which can be a gap of three or four years or, as was suggested earlier, even six or seven years. That adds between £5,000 and £8,000 to their borrowing. Did the Committee look at that? Has it made any recommendations on that specific issue?
Minister reply
The Committee certainly received some evidence on that issue. There is a logic to not paying back the loan until that point, because students are mostly not working, so there would be a real challenge in paying it back while someone is an undergraduate or graduate student. The hon. Lady rightly highlights that that has caught a lot of people unawares, as they were not aware of how much it ratchets up. There is layer upon layer of complexity, and the fact is that parents do not fully understand the impact.
Catherine West
Lab
Hornsey and Wood Green
Question
On 27 March 2026, the Minister for Skills wrote to my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) confirming that the Department for Education would release an equality impact assessment on student loan lifetime repayments and other borrower impacts for the plan 2 repayment threshold. Does the Chair of the Treasury Committee agree it is high time that the equality impact assessment was published by the Department?
Minister reply
In that simple question, my hon. Friend raises a raft of issues. For most students, the only way that they can go to university is by getting a loan. There has been a big drive to get people to go to university who would not have been able to do so before, partly because they may be from poorer backgrounds. This Government have added in extra support through the maintenance grant and so on, but there are still huge costs on young people. It is really important that in making decisions, especially as they have committed to reviewing the student loans system, the Government really understand the impact on different cohorts.
Question
I thank my hon. Friend for her statement. I was glad to be part of the Committee, which looked at ways in which we could start to make the student finance system fairer. On the issue of whether we should reverse the threshold repayment freeze, we looked at a number of ways in which we could change the financing system to make it fairer—for instance, by freezing or even cutting the interest rate cap—and reversing the threshold repayment freeze was the best way to get help to the great majority of those repaying loans, no matter what their income. Does my hon. Friend agree?
Minister reply
As my hon. Friend said, we looked at a number of ways of changing things. Once somebody has a plan that has been set up, it is very difficult to unpick different parts of it, but the threshold freeze was added on top of the plan 2 system. That is why it seems particularly invidious. There is an opportunity here—a simple lever that the Government can pull—because the freeze has not yet been implemented. If the Chancellor is looking for a quick win in the Budget, that is one of the easiest things to deliver, without causing more challenging ramifications. If he pulls that lever, it is done, and the biggest number of students would benefit from that.
Helen Hayes
Lab
Dulwich and West Norwood
Question
I thank my hon. Friend for her Committee’s excellent work on the important issue of student loans and for the good communication that she maintained with my Select Committee during her inquiry. The Education Committee concluded earlier this year that there is a genuine crisis in the financial sustainability of our universities as a result of many different pressures bearing down on them. Does she agree that if the Government do not bring forward additional measures to improve the long-term affordability of student loans, as she recommends, the risk is that more and more young people will decide not to pursue a university education? That would not only mean that they miss out on the potentially transformative impacts of such an education, but serve further to undermine the financial viability of our universities.
Minister reply
I thank my hon. Friend for the excellent work that she and her Committee do. We know that there is a crisis in the higher education system, but there is also a huge challenge for the graduates paying off these loans. It is a multifaceted picture, so I am pleased that the Government are looking at reviewing it, but people have just started plan 5 repayments, and a review that might see any changes is still a long way off. We need to have the national conversation that I mentioned about a 50:50 balance. Society benefits from most graduates. They are not just taking; they are actually giving back, and it is really important that we recognise that in our national conversation. Frankly, universities are really struggling in part because of the way in which fees are structured, meaning that they are not getting enough money, but they are still very expensive for students, so nobody is winning in this situation.
Question
One of my constituents has been in touch. He is a neonatal nutritionist and is paying a marginal tax rate on his loan of 57%. Does the Chair of the Treasury Committee agree that that is not an acceptable outcome socially and that we must have change?
Minister reply
When I looked at this issue in previous roles, before I was on the Treasury Committee, I found that one of the challenges is that the loan system is set up with lots of box-ticking and spreadsheets happening in Government Departments in Whitehall—a very long way from a 17-year-old who takes out a loan and starts paying it back after they graduate. We need to have them at the heart of the design. There will always be a discussion in government about where money is best spent and how much things cost in the short, medium and long term, but we need to ensure that the graduates paying back their loans are at the heart of that discussion, alongside the impact on further education institutions.
Question
I thank my hon. Friend for her excellent work and that of her Committee. We want our young people to have confidence that their Government will stick to their promises. Does she agree that the approach to student loans from successive Governments has dented that trust and that Government colleagues should reflect on that?
Minister reply
My hon. Friend says it better than I could. There is a trust relationship, and in the case of student loans, students have nowhere else to go for that money. They signed up on certain terms, and those terms have been changed by successive Governments, and the latest threshold freeze is just another one of those breaches of trust between the Government and those who trust them in taking out a loan.
Question
I thank the Committee for its work and for the report. I completely agree with the Chair’s presentation of the level of mistrust among graduates and learners when it comes to the broken system. Does she agree with me that this is not simply a communications issue? It is not about telling people more clearly how bad a deal they have. Fundamentally, this is a broken system—a bad deal that is having massive intergenerational impacts. Does she agree that we need a full and thorough review of the student finance and loans system?
Minister reply
It is not only my hon. Friend, I and the Committee who agree on that—it is the Government too. The Secretary of State for Education herself has said there are problems and previous Ministers have called it a broken system. There is a long way to move from a broken system to one that is fair, and the focus of our recommendations is on those who are currently paying back a loan. It is difficult to right all the wrongs for those people, but we think pulling back on the threshold freeze would be an important step for them. I absolutely agree that there needs to be proper long-term thinking about how we fund education and how the loans book is structured, and we need to provide information to people. As it is now, the system is not working.
Shadow Comment
John Glen
Shadow Comment
John Glen thanked Meg Hillier for her clear summation of the Committee’s report. He pressed her on the repayment threshold and asked whether it should be one of the top priorities for the new Chancellor on 28 October. He noted that the Government have not ruled out reviewing the threshold and highlighted the relatively modest amount of money involved and the significant number of young people who would be positively affected.
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