Student loan changes unlikely at spring statement, Reeves suggests

Changes aimed at making the student loans system fairer are unlikely to come at the spring statement, Rachel Reeves has suggested.

Sir Keir Starmer said at Prime Minister’s Questions on Wednesday he will look at ways to make the loans system fairer.

But the forthcoming financial statement is unlikely to be the opportunity to make changes, the Chancellor signalled, as she described it as “just a forecast”, rather than a fiscal event like the budget.

Slashing interest rates and changing the repayment threshold on student loans may be considered by ministers, the Prime Minister’s official spokesman indicated.

The Labour leader laid the blame for rising student loan costs with the Conservatives as he was pressed on the issue by Kemi Badenoch at Prime Minister’s Questions.

The Conservative leader has promised to cut the amount of interest paid on some student loans amid widespread concerns over costs.

Following the Chancellor’s November budget, the salary threshold at which repayments kick in under the system will be frozen at £29,385 for three years, leading to many having to pay more.

Interest on Plan 2 loans is charged at the rate of RPI inflation plus up to 3%, depending on how much a graduate earns.

Mrs Badenoch has announced plans to restrict this to RPI only, saying this would help higher numbers of graduates pay off their debt.

Ministers could be looking at changes to the threshold and interest rates, Sir Keir’s spokesman suggested, stressing they are keeping “under review the ways in which we can make life better for graduates”, when pressed on both elements.

The Chancellor was asked by broadcasters during a visit on Wednesday afternoon whether these changes could be made at the spring statement on Tuesday March 3.

Ms Reeves replied: “The spring forecast is just a forecast. We’ve committed to just one fiscal event, one budget, a year.

“What we will have next week at the spring forecast is an update in the forecasts for inflation, for interest rates, for Government borrowing.

“But I was really clear that I wanted to end the instability of budget after budget, mini-budget, fiscal events, that we had under the previous government, where we had five prime ministers and seven chancellors, and instead return the stability that is needed to our economy, so that businesses have the confidence to invest and families have the confidence to spend.”

Sir Keir and opposition leader Mrs Badenoch had earlier traded blows on the issue in the Commons.

In their weekly head-to-head at the despatch box, the Tory leader said the “system is now at breaking point for graduates, I believe that student loans have become a debt trap”.

She pressed the Prime Minister to cut interest rates on student loans.

Sir Keir replied: “I have to say I was glad to learn that the leader of the Opposition has finally admitted that they scammed the country on this, and that applies to everything they did in government.

“We inherited their broken student loans system. We’ve already introduced maintenance grants to improve the situation, which they scrapped, and we will look at ways to make it fairer, and we will do other things within the economy to help students.”

Mrs Badenoch went on to accuse Sir Keir of “taking from students to give to Benefit Street”, and pressed him to reverse changes to student loans at the spring statement next week.

Sir Keir’s spokesman later told reporters “I won’t get ahead of the spring statement” when asked whether it could include the issue.

The official said “work continues” on the matter but declined to give any more details or a timeframe, saying “we’ll update when we have one”.

Consumer champion Martin Lewis has also urged the Chancellor to reverse her decision on student loans.

Appearing on ITV’s Good Morning Britain on Monday, he said the changes would be struck down by the regulator if a commercial company tried to make them.

Mrs Badenoch and Mr Lewis are due to meet to discuss student loans on Wednesday afternoon, after a fiery exchange about the issue on the TV programme on Monday.