Conservatives Pledge to Abolish ‘Unfair’ Additional Interest on Student Loans
The Conservative Party has pledged to abolish the, "unfair", additional interest charged on Plan 2 student loans, in a move leader Kemi Badenoch has described as a, "new deal for young people".
Announcing the policy, Mrs Badenoch stated she would scrap the supplementary interest on loans taken out by students who attended university between 2012 and 2023, arguing that the current system, "increasingly feels like a scam", to young people.
The loans have faced widespread criticism for imposing an interest rate of up to 3 per cent in addition to inflation, if on a high income. Critics argue this structure has left two-thirds of graduates unable to pay off their balances. While the loans are written off after 30 years, the terms often mean graduates must earn at least £66,000 just to keep up with interest payments, frequently resulting in them paying back far more than they originally borrowed.
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Under the new proposal, the Conservatives have pledged to abolish real interest on Plan 2 loans and cap the rate at the Retail Price Index (RPI) rate of inflation, which currently stands at 3.2 per cent.
Writing for The Telegraph, Mrs. Badenoch claims New Labour pushed too many people into higher education. She accused the previous New Labour government of hitting its target of 50 per cent of young people attending university by, "creating loads of crap courses".
According to The Telegraph, the policy is expected to cost £2 billion a year. The Conservatives plan to fund this by reducing the number of people attending university to study, "low-quality degrees", by 100,000.
The announcement marks the latest step in Mrs Badenoch’s strategy to attract young voters to the Conservative party, coming alongside pledges to reduce youth unemployment, which currently stands at a ten-year high excluding years affected by the Covid-19 pandemic.
The move also increases pressure on the current government. Rachel Reeves, the Chancellor of the Exchequer, is already facing demands to reduce student loan interest payments at the Spring Statement next month, following a campaign by experts and the National Union of Students.
The debate over the value of higher education continues to grow. Research by the Institute for Fiscal Studies has found that 30 per cent of graduates never achieve the higher salaries promised by their universities, with studying for a degree representing a net financial loss over a lifetime for many.
Announcing the policy, Mrs Badenoch stated she would scrap the supplementary interest on loans taken out by students who attended university between 2012 and 2023, arguing that the current system, "increasingly feels like a scam", to young people.
The loans have faced widespread criticism for imposing an interest rate of up to 3 per cent in addition to inflation, if on a high income. Critics argue this structure has left two-thirds of graduates unable to pay off their balances. While the loans are written off after 30 years, the terms often mean graduates must earn at least £66,000 just to keep up with interest payments, frequently resulting in them paying back far more than they originally borrowed.
.jpg)
Under the new proposal, the Conservatives have pledged to abolish real interest on Plan 2 loans and cap the rate at the Retail Price Index (RPI) rate of inflation, which currently stands at 3.2 per cent.
Writing for The Telegraph, Mrs. Badenoch claims New Labour pushed too many people into higher education. She accused the previous New Labour government of hitting its target of 50 per cent of young people attending university by, "creating loads of crap courses".
According to The Telegraph, the policy is expected to cost £2 billion a year. The Conservatives plan to fund this by reducing the number of people attending university to study, "low-quality degrees", by 100,000.
The announcement marks the latest step in Mrs Badenoch’s strategy to attract young voters to the Conservative party, coming alongside pledges to reduce youth unemployment, which currently stands at a ten-year high excluding years affected by the Covid-19 pandemic.
The move also increases pressure on the current government. Rachel Reeves, the Chancellor of the Exchequer, is already facing demands to reduce student loan interest payments at the Spring Statement next month, following a campaign by experts and the National Union of Students.
The debate over the value of higher education continues to grow. Research by the Institute for Fiscal Studies has found that 30 per cent of graduates never achieve the higher salaries promised by their universities, with studying for a degree representing a net financial loss over a lifetime for many.
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