Student loans system is ‘fair,’ insists Jacqui Smith - despite graduates owing MORE a decade after their degree
£15bn in interest was added to student debt in England in 2024-25
The government has defended the ‘scandalous’ way graduates pay back their student loans in England, despite billions being added in interest.
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Education minister Jacqui Smith told LBC the system is ‘fair’ as she refused to look again at how repayments are made.
Figures show £15bn in interest was added to student debt in England in 2024-25. Only £5bn was paid back.
Graduates and campaigners have described the system as indefensible, as calls have been made for changes to repayment plans.
LBC pressed Jacqui Smith, the minister for higher education, on whether she believed it was a scandal.
Rejecting the suggestion, she said: “What we know about a university education in the UK is that you will earn considerably more during the course of your lifetime than if you don't benefit from a university education.
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“It's therefore fair that we have a system where you pay back the benefit that you have achieved as a graduate.
“Of course, we need to make sure that's done in a way that supports people and is affordable and that's why this is a very different sort of debt to any other debt that you will take on.
You only pay when you earn above a certain amount. You only pay a set proportion of your income above that amount and if you get to the end of the repayment period and you haven't paid it off, that is a write off.
“Taxpayers are contributing to students going through higher education, but students are gaining a lot of benefits and it's fair that they contribute to the system as well.”
Graduates have been sharing their own debt levels, after millions found they owe more now than they did when they graduated.
Marcus George, from Nottingham, told LBC News: “I left uni in 2016 and had taken out a loan of £33,380.
“But 10 years on from graduating this summer, the balance is £34,699. It’s sickening.
“The idea that I’ve been paying a significant portion of every pay packet towards this loan and for it to have actually gone up in value rather than decreased just seems crazy to me.
“It’s really disheartening to see that I owe more than I did 10 years ago and I’ve paid £20,000 towards it. It kind of creates the feeling of ‘well what’s the point?’”
Nadia Whittome, the Labour MP for Nottingham East, also shared online: “I left university in 2019 with £49,600 of debt. A few months later, I became an MP and have since received a salary that puts me in the top 5% in the country.
“Six years on, the repayments from my salary have brought this total down to £48,600 - just £1,000 less.
“An entire generation has been saddled with enormous debt and hefty repayments, while they struggle with stagnant pay and soaring rents, making it nigh on impossible to save.
“It is deeply unfair. We should be scrapping student loan debt and tuition fees.”
Graduates on a ‘Plan 2’ repayment loan - issued between 2012 and 2022 - face interest rates of up to three percentage points above the retail price index (RPI).
The interest also increases for higher earners.
In contrast, people with loans on ‘Plan 1’ before 2012, pay interest at RPI or the Bank Rate plus one percentage point - whichever is lower.
Oliver Gardner, from the campaign group Rethink Payment, told us: “People are very quick sometimes to dismiss this issue by saying it’s all wiped at the end of 30 years for Plan 2.
“But that ignores the fact that people, without this ridiculous interest, might have been able to pay back their loan in 20 years.
“They’re still paying it for 10 years longer than they would’ve done if interest was charged at a reasonable rate.”