Labour Push to Raise Student Loan Repayment Threshold

Labour MP Andy Burnham, the frontrunner to replace Sir Keir Starmer, is urged to back a Good Growth Foundation plan to raise the Plan 2 repayment threshold from £29,385 to £33,542, restoring the 2018 £25,000 level’s real value. iPaper estimates the move would save a graduate about £374 a year.

iNews

Plan 2 loans, for graduates since 2012, require repayment of 9 % of earnings above the threshold. Interest rates have risen above 7 % but will be capped at 6 % from September. Chancellor Rachel Reeves froze the threshold at £29,385 from 2027 until 2030.

iNews

Labour MPs Luke Charters (York Outer), Alex Sobel (students’ group co-chair), Josh Dean (Hertford and Stortford) and Joe Morris (Hexham) have backed the raise, calling the system a “trap” and a “sensible, long-overdue reform.” Good Growth Foundation strategy director Louisa Dollimore calls the plan the “fairest way” to fix the debt burden, a concrete step for Labour to win back younger voters.

iNews

Good Growth Foundation polling shows Labour support among the 5.5 million Plan 2 borrowers fell from 54 % to 30 %. Forty-four percent of all Plan 2 graduates now favour raising the threshold, versus 36 % who prefer cutting interest rates; among Labour voters the split is 47 % to 36 %. The increase would mainly help low-to-middle earners by lowering monthly payments.

iNews

Some graduates argue that cutting interest rates would be more effective, noting that high interest accrues even when payments stay unchanged, inflating balances and leading loans to be written off after 30 years. This view underscores a split over the preferred reform.

iNews

• “Charters told The i Paper: “Politics has failed young people for too long, and nowhere is that failure clearer than in a student loan system that traps them in debt and calls it opportunity.” — Luke Charters, MP for York Outer

iNews

• “If there is a triple lock for retired people and usurious levels of interest for the young we won’t be forgiven,” — Alex Sobel, Co-chair, Cross-party Students’ Group

iNews

• “just as they are trying to build a life, start a family, or put down roots.” — Josh Dean, MP for Hertford and Stortford

iNews

• “She said: “Raising the threshold would keep those on modest incomes out of repayment altogether and ease the monthly squeeze for those just above the line.” — Louisa Dollimore, Strategy Director, Good Growth Foundation

iNews

Labour leadership nominations open next month, and Burnham’s stance on the threshold could shape his platform. The Good Growth Foundation will lobby for legislation embedding threshold adjustments, while the Treasury’s budget will decide whether to extend the freeze or adopt the proposed raise.

iNews