Lucy Powell has said she wants to make sure the student loans system is “fair” and that the issue is at the top of her in-tray as the new education secretary.
Labour’s deputy leader told the BBC she stood by comments she made in February that the interest rates graduates with Plan 2 loans were paying were “egregious”.
She said she was committed to looking at the issue, although acknowledged she “can’t make any promises” about changes.
Plan 2 loans 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%.
In November last year, then-Chancellor Rachel Reeves said the repayment threshold for students with Plan 2 loans would be frozen at £29,385 between 2027 and 2030, instead of rising 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 have called for that decision to be reversed.
Reeves later said the government’s measures were “fair and proportionate” for getting “the balance right between tax and spending”.
In April, the government said interest on some student loans in England – including Plan 2 – would be capped at 6%.
Speaking to Matt Chorley on BBC Radio 5 Live, Powell said she was “very familiar” with the issue as her eldest child has a Plan 2 loan.
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 [retail prices index] plus 3%.
“I think I’ve called it in the past egregious and I’m not going to change my opinion on that just because I’m now the secretary of state.
“The government has committed to a review of that, it’s very much at the top of my in-tray as the secretary of state, and I want to make sure we look at this so it’s fair for students.”
Powell described it as a “real cost-of-living issue” for young people, adding: “They’re paying high repayments and never, ever paying off the capital of their student loan.”
Pressed on whether it is something she will look at, Powell replied: “Yes. I can’t make any promises, but it needs looking at.”
MPs on the Treasury Committee this month said comparing student loan repayments to phone contracts or cinema tickets “amounted to mis-selling” by government.
It came after a BBC investigation found the government compared student loan repayments to £30-a-month phone contracts in promotional presentations to teenagers a decade ago.
Earlier this year, Conservative leader Kemi Badenoch said she would cut the rate of interest charged on Plan 2 loans, capping it at RPI only. The current RPI rate is 3%.
