120 MPs and peers urge urgent review of student loan repayments

More than 120 MPs and peers have asked the chancellor to carry out an

urgent review

of the student loan repayment system. An open letter coordinated by the campaign group Rethink Repayment says the current set-up places an

unsustainable burden on the next generation of workers

.

Why are MPs and peers calling for reform?

The cross-party signatories include MPs who have their own Plan 2 student loans, which have come under particular scrutiny this year. Last week, Education Secretary Lucy Powell said the interest rate on those loans was

egregious

and that the issue was at the top of her in-tray.

Current and former students have different student loan plans depending on where they live in the UK and when they went to university. The letter to Chancellor John Healey does not specify a particular plan signatories would like to be reformed, nor does it name a particular nation.

However, the debate has centred around Plan 2 loans, which were taken out by students in England between September 2012 and July 2023 and are still issued in Wales. Graduates pay back what they earn above the repayment threshold at a rate of 9%.

What does the letter say about repayment terms?

The letter says that

successive governments' adjustments to repayment thresholds – together with high interest and marginal tax rates – are placing an unsustainable burden on the next generation of workers

. It says many middle-income graduates

see less than half of any hard-earned pay rise due to a combination of income tax, national insurance and student loan repayments

.

It adds:

We are united in the belief that the current repayment framework requires urgent review... to ensure it is fair, sustainable, and supportive of aspiration.

The letter refers to a decision taken last November by then-Chancellor Rachel Reeves to freeze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, instead of allowing it to rise with inflation. The change would result in students starting to repay their loans sooner than they would otherwise have done, and their rising salaries leading to greater repayments.

Campaigners want that decision to be reversed, a call echoed by the Treasury select committee in a report following its inquiry into student loans last month.

The committee's report referenced a BBC investigation which found the government compared Plan 2 student loan repayments to £30-a-month phone contracts in promotional presentations to teenagers a decade ago. This was

inaccurate for higher earners

, the report said, and

amounted to mis-selling

.

Who has signed the letter?

Laura Trott, shadow education secretary for the Conservatives, and Munira Wilson, education spokeswoman for the Liberal Democrats, are among MPs who have signed the letter. Tom Gordon, Liberal Democrat MP for Harrogate and Knaresborough, also signed the letter and told the BBC he could not

see an end in sight

to his own Plan 2 student loan repayments.

Instead, he said he expected his debt to be written off after 30 years in line with the repayment terms.

If someone earning an MP's salary still isn't likely to repay their student loan in full, what chance does someone on a much lower income have?

Gordon asked, adding it was

an issue of fairness

.

Governments have changed the repayment terms and increased interest rates after people had already signed up,

he said.

No bank or mortgage lender could retrospectively rewrite the terms of a loan like that. It simply wouldn't be allowed. So why should the government be able to do it?

What do campaigners and the government say?

Oliver Gardner, founder of Rethink Repayment, said the letter showed

the student loans crisis

was not

a partisan issue

.

We believe that now is the time to create a system that is fair and that unshackles millions of graduates from mountains of student loan debt,

he said.

Responding to the Treasury select committee's report last month, a government spokesperson said ministers were

already taking decisive action

and would

continue to look for ways to make the system fairer for students, graduates and taxpayers in a financially sustainable way

.

The debate has also featured in recent related coverage, including reports that phone contract comparisons

amounted to mis-selling

student loans, and that school talks were described as

deeply misleading

when they compared student loans to £30 phone contracts.

The Treasury select committee inquiry also followed wider scrutiny of how student loans are understood by borrowers. Separate reporting has highlighted concerns that many did not understand the terms of their loans, while other coverage has examined how tuition and maintenance loans work, changes to voluntary student loan repayments in England, and Education Secretary Bridget Phillipson's defence of student loan changes in which she said average repayments would rise by £8 a month.

For many graduates, especially those with Plan 2 loans, the issue remains tied to how repayment thresholds, interest rates and income-based deductions affect take-home pay. The campaigners argue that the current framework leaves too much of ordinary salary growth absorbed by the tax system and loan repayments, while ministers say any changes must remain fair and financially sustainable for students, graduates and taxpayers.

Key Facts

• More than 120 MPs and peers have signed an open letter asking Chancellor John Healey for an urgent review of student loans.
• The debate has centred on Plan 2 loans, taken out by students in England between September 2012 and July 2023 and still issued in Wales.
• Rachel Reeves froze the Plan 2 repayment threshold at £29,385 between 2027 and 2030 last November.
• The Treasury select committee said the phone contract comparison used in promotional presentations was inaccurate for higher earners and amounted to mis-selling.
• The government says it is already taking decisive action and will keep looking for ways to make the system fairer in a financially sustainable way.