Tories vow to cut ‘unfair’ student loan interest and boost apprenticeships
Kemi Badenoch proposes reducing the number of university entrants by 100,000 to lessen debt burden on graduates
The Conservatives have vowed to slash the interest that graduates pay on their student loans.
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The move will add pressure to the Treasury to overhaul the system.
The reforms, proposed by the Conservative Party leader Kemi Badenoch, will see graduates on Plan 2 loans have their interest cut each month cut with a new reduced interest rate.
Graduates on Plan 2 loans are the first cohort to pay £9,000 a year fees, and are those who studied between 2012 and 2023.
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Currently, these graduates are required to make 9% loan repayments.
This only applies if their income is above the repayment threshold, which currently stands at £28,470.
The student loan system has come under fire in recent months, with the Chancellor, Rachel Reeves, facing demands to reduce student loan interest payments following a campaign by experts and the National Union of Students.
This comes in the run-up to the Chancellor’s Spring Statement next month.
Student loans are written off after 30 years, but in order for a graduate to keep up with interest payments, they must earn at least £66,000, a figure that means two-thirds of graduates are unable to pay off their student loan balance.
The system also means that, over the course of their career, graduates will often pay back far more than they borrowed.
Pledging to abolish real interest on Plan 2 loans, the Conservatives have also suggested capping the interest rate at the RPI rate of inflation, which is currently 3.2 per cent.
The Conservative student loan plan would be funded by reducing university places for ‘low quality degrees’ by 100,000.
The party is also pledging to lift the cap on apprenticeship subsidies for employers, which, it argues, would bring people into the workforce earlier.
They also have also suggested giving employers up to £5,000 for each 18 to 21-year-old British citizen apprentice an employer takes on.