Lucy Powell has put the Plan 2 student loans system at the top of her agenda, saying the arrangements must be fair as she settles into her new role as education secretary. In comments to the BBC, the Labour deputy leader stood by her earlier criticism of the interest rates paid by graduates on these loans, which she once called egregious.
Powell said she is committed to looking at the issue, but she stopped short of promising changes. Speaking to Matt Chorley on BBC Radio 5 Live, she said she was very familiar with the subject because her eldest child has a Plan 2 loan. She said the problem was not only the point at which repayments begin, but also the rate itself, which is set at RPI plus three percent. She added that the government has already committed to a review and that the question is now high on her in-tray.
The Plan 2 student loans system covers loans taken out by students in England between September 2012 and July 2023, and it is still used in Wales. Graduates repay nine percent of what they earn above the repayment threshold. In November last year, then-Chancellor Rachel Reeves said the threshold for those loans would be frozen at £29,385 between 2027 and 2030, rather than rising with inflation. That change means people would start repaying sooner than they otherwise would have done, while salary growth would push repayments higher over time.
Reeves later defended the wider approach as fair and proportionate, saying the government had tried to strike the right balance between tax and spending. In April, ministers also said interest on some student loans in England, including Plan 2, would be capped at six percent. Powell’s comments suggest the issue is still live inside government, even after those earlier adjustments.
