Quite an achievement to grab acres of media coverage to highlight the raw deal graduates from England’s get from student loans scheme at the same time as President Trump has unleashed US and Israeli firepower on Iran and lashed out at allies, including British prime minister Keir Starmer, for not immediately jumping to attention to support his ‘Operation Epic Fury’.
But somehow the campaign to reduce the debt burden facing graduates is managing to cut through all the noise generated by the deteriorating situation in the Middle East and the latest tantrums from the White House.
And the focus could prove positive if the government looks beyond minor tweaks and more mini U-turns to calm the clamour for change in the way we fund higher education, including some novel ideas from the likes of Johnny Rich, which I explore towards the end of this blog.
Perhaps, it helps that national journalists and MPs are among those feeling the pinch on middle-to-higher earners at the ever-increasing debt mountain imposed on graduates, particularly those on so-called ‘Plan 2’ student loans introduced when undergraduate tuition fees were trebled to £9,000-a year in 2012.
It means it is not just the usual suspects, like the National Union of Students, who are calling for fairer deal, especially for the cohort that graduated between 2012 and 2023, now in their late twenties and early thirties and facing up to 6.2% interest on the balance of their student loans.
Even The Times has accused the powers-that-be of ‘Loan Sharking’ – with a leading article on 27 February, 2026, quoting 29-year-old biochemistry graduate, Max Lingford, who took out a £84,000 student loan to cover tuition fees and maintenance for his five year degree.
‘A tawdry scam’
“Since graduating in 2023, he has managed to repay £8,000. The result? A debt that now stands at £110,000,” said The Times, which claimed the student loan system had become “a tawdry scam”.
Harsh words, but even Nick Hillman, a key architect of the ‘Plan 2’ student loan system when he was special advisor to then universities minister David (now Lord) Willets during the Conservative-Liberal Democrat coalition government, accepts the 2012 settlement is no longer sustainable.
In an interview with the i-newspaper on 5 March, 2026), Hillman, now director of the Higher Education Policy Institute (HEPI), said changes introduced by the Tories after they ditched their Lib-Dem junior partners in government meant he no longer has any confidence in the scheme. Chief among these changes were freezing the threshold at which graduates start loan repayments of 9% and scrapping maintenance grants for poorer students.
“I’m pretty much the last man standing willing to defend of the 2012 settlement – but what I am defending is very much the 2012 settlement, not all the tweaks that happened afterwards”, Hillman was quoted telling the i-newspaper.
Reigniting the controversy
However, while the Conservatives should take most of the blame for the Plan 2 student loan mess, the current Labour Chancellor Rachel Reeves is to thank for reigniting the controversy over student loans – or at least the repayment scheme.
For it was her announcement of a new freeze on the earnings level at which graduates start to repay the loans in her November budget that was the spark to set alight the latest controversy.
Plan 2 graduates currently start paying 9% off their student loans on everything they earn above £28,470-a-year.
That’s due to go up to £29,385 from April 2026, but it will then be frozen at that level for the next three, up to the next general election.
Well, let’s see whether the outburst of anger forces another Labour government U-turn.
Campaigners, including the journalists and MPs, also want the high interest levels on student debt to come down.
And they are being backed by an increasingly strident Tory leader, Kemi Badenoch, who seems blind that it was the Conservatives who introduced Plan 2 student loans and made matters worse by scrapping maintenance grants and fixing the interest levels.
As for Nick Hillman, he told me the other day: “This is very challenging because I think we should listen to Plan 2 borrowers but we don’t really know what they most want because the campaigners – who tend to be well-paid MPs and doctors and the like – are not necessarily representative of the majority.
“However, unless policymakers tackle the high interest rate, Plan 2 borrowers will go on being worried about the psychological burden of debt and will continue posting their student loan statements all over social media.
Labour concerns
“On the other hand, in their hearts it is likely that the Labour Party will be more concerned about the thresholds and monthly repayments and they should also be worried about the cost-of-living for current students.”
Back at The Times, chief political commentator Patrick Maguire, seems to agree, suggesting that while higher-earning graduates get the worst deal from Plan 2 loans, Education Secretary Bridget Phillipson, will want to help the lower-paid most, especially those disincentivised by losing a whack of their income though a frozen repayment threshold.
“These short changed learners might not be the loudest but when push comes to shove they are with this Labour Party is likeliest to divert its limited resources to protect,” argues Mcguire.
However, while political pundits like Hillman and Mcquire argue the toss about whether it would be better to cut interest rates on growing debt mountains or to unfreeze the repayment thresholds, I wonder why don’t we take this opportunity to have a wholesale review of the student loan model – which most experts think is now broken!
This outdated model has virtually privatised higher education in England and Wales (Scotland still has free undergraduate education, but only for Scots) and means English students are funding over 90% of their degrees, albeit paying after they graduate and when they find work paying above the income-contingent threshold.
Chancellor Reeves has told the press that the Labour government wants to make the system fairer, but she and premier Starmer are probably looking at minor tweaks to show they are listening to graduate anger in the hope the problem will just go away.
But if Labour meant what they said in their 2024 General Election manifesto about real change, they should be open to scrapping the student loan system completely and looking for better alternatives.
Rich ideas
Among those offering new ideas is Johnny Rich, head of outreach organisation Push and chief executive of the Engineering Professors’ Council.
His alternative system would scrap student tuition fees with a Graduate Employer Contribution (GEC) scheme , with students only repaying for their maintenance loans – and at a rate of 3%, and not the current 9% above the earnings threshold.
Employers would also pay 3%, with the employer contribution going directly to the university (or universities) where that graduate they are employing studied.
“So, universities would be financially rewarded for producing employable graduates and have a long-term stake in graduate outcomes,” explains Rich.
Originally, Rich thought both graduate and employer should pay 4.5%, but modelling by London Economics a couple of years ago suggested his GEC scheme would eventually save the government billions of pounds.
Rich explained how his system would produce a graduate population that meets the economic and social needs of the future in a blog titled ‘What’s the real political probleml with higher education funding? for HEPI on 20 February, 2026.
Employability
He admits his focus on employability would replace the current system which was designed to put students at the heart of the system, but Rich claims that has put too much power in the hands of 17-year-olds choosing courses, because funding follows student choice alone.
Employers would technically pay 3% more for hiring a graduate compared to a non-graduate, but Rich argues that employers already pay a graduate premium (often 15%+ in higher wages).
If they truly didn’t value graduates, they wouldn’t already pay more for them, Rich says, adding that a 3% levy is small compared to the productivity gains they expect.
As for the government, instead of lending money to individual students for 30 to 40 years, the government would lend to universities directly based on student numbers and universities would repay over long time horizons, with repayment indirectly funded by employer contributions.
For someone like Rich, who is deeply involved with promoting career opportunities in engineering, the GEC model tackles one of the big bug bears of the industry as universities are currently short of cash to invest in creating more places in high cost subjects like engineering, as tuition fees are capped (by the government) at around £7,600 lower than the cost of providing additional places.
To sum up Rich’s GEC idea is one sentence: Instead of graduates alone repaying 9% for 30-40 years, graduates would pay 3% and employers would pay 3%, with employer payments going back to the university that produced the graduate — aligning university funding with labour market outcomes.
What’s wrong with setting up a proper review to consider Johnny Rich’s ideas, along with other alternatives? See How should undergraduate degrees be funded? A collection of essays, edited by Rose Stephenson for HEPI for some ideas.
- Main photo: NUS demonstration against the Chancellor’s freeze on the students loan repayment threshold outside Parliament: Photo: National Union of Students