Student Loans

I inform the House that the Speaker has selected the amendment in the name of the Prime Minister. I call the shadow Secretary of State.

I beg to move,

That this House calls on the Government to set the interest rate on Plan 2 student loans at a level which ensures that balances will never rise faster than RPI inflation; further calls on the Government to stop the freeze on repayment thresholds; and also calls on the Government to create more apprenticeships for 18-21 year olds, funded by controlling the number of places on university courses where the benefits are significantly outweighed by the cost to graduates and taxpayers.

In June 2023, the then shadow Education Secretary, the right hon. Member for Houghton and Sunderland South (Bridget Phillipson), proclaimed, “Graduates, you will pay less under Labour”. Well, it turns out that that was not true; under Labour, graduates are paying more. So far, under this Government tuition fees have gone up twice. This is a long way from the abolition of tuition fees offered up by a fresh-faced candidate for the Labour leadership just a few years ago—I wonder what happened to him.

It is no wonder that students feel misled by this Government. Not content with hiking tuition fees when they said they would not, this Government also froze the thresholds for repayments, making loans even more expensive for graduates. As with everything this Chancellor touches, she makes it worse. Her choice to freeze the repayment thresholds has left young people paying more and sooner. What did the Chancellor say when challenged about the threshold freeze in January? She said that the student loan system is “fair and reasonable”. To be clear, this was the stance—that the student loan system and the threshold freeze were “fair and reasonable”—of the Labour Government as recently as January. Tell that to the graduate forced to pay an extra £24,000 because of the Chancellor’s changes. The Chancellor is wrong: it is not fair or reasonable.

Given that plan 2 tuition fees were introduced by the Conservatives in 2012, that they froze the repayment thresholds in 2016 and that they abolished the maintenance grants, was that fair then?

The hon. Gentleman is missing the fact that Labour has made it worse. Even now, the Chancellor has changed her tune—no surprise given the track record of this Government. She now says that the system is “broken”, but young people are apparently not at the “front of the queue”. I did not see that on the front of the Labour manifesto. We on the Opposition Benches think that young people should be at the front of the queue, because thanks to Labour, Britain’s youth unemployment rate has topped the eurozone for the first time ever. Graduates coming out of university cannot get jobs. Graduates in work are seeing their student debt mounting up.

I have been contacted by many students in Epping Forest who are deeply concerned about their future debt and by many graduates who are worried about ballooning debt on these plan 2 loans. Does my right hon. Friend agree that the Labour Government have an opportunity to step in and relieve the pressure on young people and adopt the Conservative plans to scrap real interest rates on these plan 2 loans?

My hon. Friend is absolutely right. We have a chance today to create a new deal for young people. I hope that some Government Members vote for it.

I must declare an interest as someone in the first year group to have a plan 2 student loan under the broken system introduced by the Conservatives and the Liberal Democrats that we have today. Will the right hon. Member apologise to my generation for £9,000 tuition fees, for the broken system she created and for failing to introduce the Renters’ Rights Act 2025 that this Government have acted to introduce?

If the hon. Lady thinks the system is broken, I invite her to vote for our motion.

Every metric for young people has got worse since this Government came in. It is crystal clear that for young people, as for the rest of the country, Labour is not working.

My right hon. Friend will have noted, as I have, that the hon. Member for Hastings and Rye (Helena Dollimore), the hon. Member for Hartlepool (Mr Brash) and other Labour Members wish to talk about the past. Our constituents, and graduates who are paying these outrageous sums, want to talk about the future. At the general election, they listened to Labour’s promises on lowering costs for graduates, but the Government are doing exactly the opposite. By deflecting and talking about the past rather than accepting responsibility for the government that they are delivering, Labour Members are letting down all those young people, whose aspirations should be respected.

My right hon. Friend is quite right: not only did Labour mislead the public, but it then made things worse. Now, Labour Members will not vote to fix it. That is Labour all over.

We need a plan to fix the problem, but it is not enough to fiddle with one part of the problem. We need comprehensive change, and that is exactly what we Conservatives have come up with: a new deal for young people. The plan, which could be implemented today, would reverse the threshold freeze, make interest rates for plan 2 loans inflation-only, stop dead-end degrees, and boost apprenticeships so that young people have real choice when they leave school, not a future weighed down by debt.

The right hon. Lady talks about a comprehensive plan and giving people choices, but this is not a comprehensive plan for student loan reform; it is a plan written on the back of a fag packet. It basically revolves around restricting university access, which is always the go-to solution for the Conservatives. In truth, it will mean that people like me—I was the first person in my family to go to university—will not get to go to university. People who go to Brunel University in my constituency will face restrictions in course levels. That is not a widening of opportunity and choice, but a restriction of them.

No, the plan would massively widen choice. At the moment, the number of young people who want to start apprenticeships is much smaller than the number of apprenticeships available—we need to change that and the system. It is not good enough for the Government to table an amendment to our motion stating that they will make the system fairer and financially sustainable, when they are making it less fair and less financially sustainable.

At the moment, the system is punishing aspiration, and that is demoralising for young people. They leave university having done everything that was asked of them. They work hard and get a promotion, and then the interest on their loan goes up. They pay back far more than they ever borrowed. A typical plan 2 graduate needs to earn £66,000 a year just to keep pace with the interest. Young people should not be punished for doing the right thing.

The right hon. Lady talks about making the system fair. Will she comment on what her party did in government? The Conservatives abolished the maintenance grant, which means that low-income students have bigger debts and have to pay back more. This Labour Government have acted to bring back the maintenance grants that her party took away.

The Chancellor said that the system was fair and reasonable—what a joke! The Government do not recognise the scale of the problem, but we do, and we have come up with a plan to fix it. What is their plan? It does not exist.

Vacancies for graduates have gone down precipitously this year compared with the same time last year. That should worry those of us who are interested in the future. How can we rebalance the offer to young people so that they are not sold a pup—as they have been by consecutive Governments over many years—in relation to what a degree will mean for their future career prospects? How can we ensure that our incredibly valuable further education sector is supported—probably at the expense of some of our lesser universities?

My right hon. Friend is absolutely right: there is nothing progressive about letting a young person take a university degree that has negative returns for them. That is not fair or right, and we should fix it.

The problem is not just the loans, but a system that funnels young people into university courses that do not get them jobs and do not allow them to repay their loans. The Institute for Fiscal Studies says that 30% of university degrees have negative returns for those who study them. It is not just that they do not help, but that they have negative returns. It is worse for those students to go to university—that is not progressive.

Some 75% of the value of loans for creative arts courses is not paid back. Creative arts is an engine of the UK economy, but too many courses just do not deliver jobs in the industry that they purport to serve. It is a mis-selling scandal where brochures promise a glittering career, but the courses deliver nothing but debt and a dead end. That is not right. Of course, creative arts courses that actually lead to jobs should continue, but those who are selling a lie do not have any place being taxpayer funded.

The consequences of this broken system are already becoming clear. According to the Centre for Social Justice, more than 700,000 graduates are currently out of work and claiming benefits. That should concern every Member of this House.

Is my right hon. friend also concerned by the fact that, last year, the Office for National Statistics said that 257,000 people left the UK, up from an expected 77,000? Three quarters of those people were under the age of 35. That shows that young people are fleeing this country to look elsewhere for work. Does she share my concern that that is the case?

My hon. Friend is, as ever, absolutely right. Opportunity should be created for young people here, not in other countries, and that is what we want to create.