Powell concedes Plan 2 loan repayments burden graduates amid fiscal constraints

Education Secretary Lucy Powell has acknowledged that repayments on Plan 2 student loans are unfair and place a real burden on young people. She said she still cares strongly about the issue, but argued that strained public finances, which she linked partly to the US war with Iran, constrained the Government’s ability to act at the Budget.

Plan 2 loans were taken out in England between 2012 and 2023, and accrue interest at RPI inflation plus up to 3 per cent, depending on income. More than five million people are on the scheme; repayments begin once earnings reach £29,385, a threshold frozen for three years. The Conservatives have proposed limiting interest to RPI, while Powell noted that changes to rates or thresholds could affect the value of the Government’s student loan book and borrowing.