The Tories have moved to outflank Labour by pledging to slash eye-watering student loan repayments.
Kemi Badenoch is proposing to get rid of 100,000 places on ‘low quality’ university courses to fund an overhaul.
Anger has been growing at the huge interest rates on so-called ‘Plan B’ loans, with many former students highlighting that their debt is rising despite being in good jobs.
Interest on Plan 2 loans is charged at the rate of RPI inflation plus up to 3 per cent, depending on how much a graduate earns.
The issue has been fuelled by Rachel Reeves announcing at the November Budget that the salary thresholds at which repayments kick in are being frozen at £29,385 for three years.
The Chancellor has so far batted away calls for a rethink, suggesting that the only way of easing the pressure is to reduce inflation more broadly.
Education Secretary Bridget Phillipson squirmed this morning as she was grilled on the situation, insisting she will ‘look’ at the arrangements.
Education Secretary Bridget Phillipson said she ‘recognises the challenges that are there’ but stopped short of giving any commitments
Kemi Badenoch is proposing to get rid of 100,000 places on ‘low quality’ university courses to fund an overhaul
The Conservatives said they would restrict the rate to RPI only to help higher numbers of graduates pay off their debt.
Appearing on Sky News this morning, Ms Phillipson said she ‘recognises the challenges that are there’ but stopped short of giving any commitments.
She added on the BBC: ‘It is really difficult and we will continue to keep under review ways in which we can make it better.’
Ms Reeves said earlier this month: ‘By getting inflation down, we can also reduce the interest on student loans and I think that will make a big difference in making that more affordable.’
Campaigners have accused the Treasury of acting like a loan shark, while Labour’s deputy leader, Lucy Powell, described existing interest rates on Plan B loans as egregious and suggested the burden was unfair.
The Conservatives want to cut the number of university entrants by 100,000, which they say would save the Government £3.6billion, and fund the same number of extra apprenticeships for 18 to 21-year-olds, as part of a ‘new deal for young people’.
Young UK citizens starting their first full-time job would also see the first £5,000 of national insurance they pay put into a personal savings account, which could be used to buy a home.
Writing for the Telegraph, Mrs Badenoch said: ‘I am horrified at what graduates today are dealing with, and this is one of the reasons millions of young people feel they’ve been stitched up.
‘Plan 2 student loans, the system most people who started university from 2012 to 2023 are on, increasingly feel like a scam.’
She added: ‘If we want a country that rewards work, builds skill, and restores pride in practical achievement, we have to stop looking down on the very training routes that build the country.’
Interest on Plan 2 loans is charged at the rate of RPI inflation plus up to 3 per cent, depending on how much a graduate earns
A source close to shadow chancellor Mel Stride said he wants to help ‘people who went to uni, got a decent job and find themselves with sometimes ridiculously high marginal tax rates’.
‘They’re paying eyewatering interest on their student loans to subsidise others doing low quality degrees who will never repay,’ the source said.
‘It ends up being not just unfair but really bad economics too – people start to think, “What’s the point?” We have to give people some hope.’
