Andy Burnham’s Chancellor faces enormous pupil mortgage demand to cease graduate distress
Andy Burnham’s Chancellor must reverse a decision to freeze the student loan repayment threshold to prevent young graduates’ salaries being walloped further, MPs have warned
Andy Burnham is said to want to ease the burden of student loans(Image: Peter Byrne/PA Wire)
Andy Burnham’s Chancellor must reverse a decision to freeze the student loan repayment threshold to prevent young graduates’ salaries being walloped further, MPs have warned.
Rachel Reeves has been criticised by the influential Commons Treasury committee for announcing a three-year threshold freeze in last year’s Budget.
Graduates who took out a student loan between September 2012 and July 2023 pay back 9% of everything they earn over £29,385.
This threshold will now be frozen from 2027 until 2030, instead of being uprated annually in line with earnings as was promised when Plan 2 loans were first announced in 2010.
The National Union of Students (NUS) likened the Government to a “loan shark” as students were “mis-sold mortgage-sized debts that politicians can raise repayments on at the drop of a hat”.
MPs on the committee called on Ms Reeves’s successor to reverse the decision and warned them “to honour the terms and conditions under which those loans were sold to students”.
Mr Burnham is widely expected to succeed Keir Starmer as PM on July 20, with Ed Miliband and Shabana Mahmood among names floated as his Chancellor. The ex-Greater Manchester mayor is said to want to ease the burden of student loans.
In its report, the Treasury committee concluded that the government has chosen “the politically convenient option of loading additional fiscal burdens on to younger generations while hoping that young people will not notice the extra weight for decades to come”.
It also said the Government has “taken advantage” of its student loan policies being exempt from consumer protection laws which means it cannot be held liable in law for mis-selling.
MPs pointed out examples of student loans having been mis-sold, including a series of YouTube videos and slides by the Department for Education (DfE) that “did not disclose that the government could vary the terms and conditions of loans retrospectively”.
It also highlighted DfE promotional materials that compared the monthly cost of student loan repayments to the monthly cost of a mobile phone or cinema tickets, which MPs said “was inaccurate for higher earners”.
Chair of the Treasury Committee, Dame Meg Hillier, said: “Our report is a signal to the Treasury and the Department for Education that this can no longer be ignored. Patience has run out. Ministers openly accept that the system is broken and unfair but have said that it is not a priority to fix it.”
Lewis Wilson, NUS’ Vice President of higher education, said: “Student debt is growing by £1,000 a second. Young people have been mis-sold mortgage-sized debts that politicians can raise repayments on at the drop of a hat. The Government has acted like a loan shark while we struggle to even pay our rent – there is of course a clear, moral obligation to fix student loans.
“There’s a huge opportunity for a new Labour administration to draw a line between themselves and the current government, show they’re listening to the five million Plan 2 graduates and deliver for us in the Autumn budget with some immediate fixes: raise the repayment threshold and lower the repayment rate.”
The Government announced earlier this year that this interest will be capped at 6% from September to protect graduates from rising inflation during the war in Iran.
Many graduates have found that despite years of repayments, their debt balance has either risen or stayed the same as a result of inflation. The threshold was previously also frozen by Tory governments from 2016 to 2018 and again from 2021 to 2025.
