New Education Secretary Lucy Powell says pupil mortgage rate of interest ‘wants ‘
Lucy Powell was an outspoken critic of the student loan interest rate before taking on the role, and has now backed a review of how much students are asked to fork out
Education Secretary Lucy Powell is a long-term critic of the interest rates on student loans(Image: © 2026 PA Media, All Rights Reserved)
The student loan interest rate is “egregious” and needs “looking at”, the new Education Secretary has claimed.
Lucy Powell was an outspoken critic of the system before taking on the role, and has now backed a review of how much students are asked to fork out.
Graduates who took out a student loan between September 2012 and July 2023 pay back 9% of everything they earn over £29,385. However, the government’s own data forecasts that just 55% of full-time undergraduates starting in 2025/26 will repay their loans in full.
Speaking to BBC Radio 5 Live, Ms Powell described the fees as a cost of living issue.
She said: “I think it’s not just about the threshold of when people start to pay it back, but also the interest rate, which is … RPI plus 3%, which is, you know, I think I’ve called it in the past egregious. And I’m not going to sort of change my opinion on that just because I’m now the secretary of state.
“So, look, the Government has committed to a review of that. It is … very much at the top of my in-tray as the secretary of state.
“And, you know, I want to make sure that we look at this so that it’s fair for students. And it’s a real cost-of-living issue for young people because there’s about a 10-year sort of timeframe for people on this plan two as well.
“So, they’re paying high repayments and never, ever paying off the capital of their student loan.”
The former Chancellor Rachel Reeves was previously criticised by the influential Commons Treasury committee for announcing a three-year threshold freeze in last year’s Budget.
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.
Asked whether it was something she would deal with, Ms Powell said: “I can’t make any promises, but, you know, it needs looking at.”
The National Union of Students previously branded the Government a “loan shark”, with students “mis-sold mortgage-sized debts that politicians can raise repayments on at the drop of a hat”.
Last week this newspaper revealed half of graduates who took out a student loan would not do so if they had their time again.
Research by Obsurvant found only half felt properly informed when they chose to go, while just 54% felt their time at university had prepared them for big financial decisions.
