New Education Secretary, Lucy Powell, has placed the controversial student loan system at the top of her priority list, promising to examine whether it remains fair for graduates struggling with rising repayments.
The Labour deputy leader told the BBC that she still stands by comments she made in February describing the interest rates paid by graduates with Plan 2 student loans as “egregious”, insisting her position has not changed despite her new government role.
Powell said she is committed to reviewing the issue, although she admitted she “can’t make any promises” about possible changes.
Speaking to Matt Chorley on BBC Radio 5 Live on Tuesday, July 28, 2026, Powell said she was “very familiar” with the concerns surrounding student loans, noting that her eldest child has a Plan 2 loan.
She said the issue was not only about the income threshold at which graduates begin repayments, but also the interest rate attached to the loans.
“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 said.
She described the student loan burden as a “real cost-of-living issue” affecting young people, arguing that some graduates make high repayments without ever clearing the original amount borrowed.
“They’re paying high repayments and never, ever paying off the capital of their student loan,” she said.
When asked whether she would personally look into the matter, Powell replied: “Yes. I can’t make any promises, but it needs looking at.”
Plan 2 loans were taken out by students in England between September 2012 and July 2023 and are still issued in Wales. Graduates repay 9 per cent of earnings above the repayment threshold.
In November last year, former Chancellor Rachel Reeves announced that the repayment threshold for Plan 2 loans would be frozen at £29,385 between 2027 and 2030 instead of increasing with inflation.
The decision means graduates could begin repayments earlier than expected, with salary growth potentially leading to higher repayments. Campaigners have called for the move to be reversed.
Reeves later defended the Government’s decision, describing the measures as “fair and proportionate” and aimed at maintaining the right balance between taxation and spending.
In April, the Government announced that interest rates on some student loans in England, including Plan 2 loans, would be capped at 6 per cent.
The issue has faced renewed scrutiny after MPs on the Treasury Committee said Government comparisons of student loan repayments to phone contracts and cinema tickets amounted to “mis-selling”.
The criticism followed a BBC investigation which found that student loan repayments had been compared with £30-a-month mobile phone contracts in promotional presentations aimed at teenagers more than a decade ago.
Earlier this year, Conservative Party leader, Kemi Badenoch, said she would reduce the interest charged on Plan 2 loans by capping it at the RPI rate only, which currently stands at 3 per cent.