The new Education Secretary has said she is looking at what she described as the “egregious” student loan repayments system as a priority.
“I think it’s not just about the threshold of when people start to pay it back, but also the interest rate, which is 3 per cent plus RPI…which is, I think I’ve called in the past, egregious,” Ms Powell told BBC Radio 5 Live’s Matt Chorley.
“And I’m not going to 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 time frame of people on this plan.
“So they’re paying high repayments and never ever paying off the capital of their student loan.”
But Ms Powell added that she “can’t make promises” on changing the system in the immediate future.
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Prime Minister Andy Burnham (left) and Education Secretary Lucy Powell
PA
Graduates with Plan 2 loans pay back nine per cent of everything they earn over the repayment threshold.
The maximum interest a student can accrue on a Plan 2 loan is 6.2 per cent.
However, in her November Budget then Chancellor Rachel Reeves announced that this will be capped at 6 per cent in England in the 2026-27 academic year.
She also said the salary threshold for repayments would be frozen at £29,385 between 2027 and 2030, rather than rising with inflation, which means graduates start repaying sooner than they would otherwise have done and rising wages will lead to greater repayments.
Activists have argued that those on newer repayment plans face large deductions from their wage packets as the cost of living rises.
Campaign group Rethink Repayment has branded the system “unfair, unsustainable and in urgent need of reform”.
MPs earlier this year said the terms of the loans had not been laid out clearly enough and called for a U-turn on the decision to freeze the income threshold.
The Treasury Committee said Government presentations to teenagers a decade ago that compared student loan repayments to £30-a-month phone contracts “amounted to mis-selling”.
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Lewis Wilson, from the National Union of Students, has said Andy Burnham’s administration should raise the repayment threshold and lower the repayment rate, adding there was a need for “fundamental reform” in the coming years.
On Monday, the new Prime Minister announced a major shake-up of England’s education system in a bid to tackle youth unemployment.
He hopes that renewed focus on technical skills and vocations will take pressure off the university system and boost the workforce in understaffed industries at a time graduate job vacancies are declining.
