Liberal Democrats release plan to reform the student loan system

The Liberal Democrats have called on the government to reverse plans to freeze student loan repayment thresholds, as part of their wider plan to “fix the student finance system”.

The proposals have been announced in the midst of ongoing debates about the fairness of the student loan system in England.

Last autumn, Chancellor Rachel Reeves made the decision to freeze Plan 2 student loan repayment thresholds, in a move that critics have described as “morally wrong”.

The Liberal Democrat proposals would see the unfreezing of these repayments thresholds to raise the threshold in line with average earnings, “so as wages rise, you keep more of what you earn”.

This would help tackle the recruitment and retention crises in the NHS and schools, while rewarding those who commit to public service

Statement from the Liberal Democrats

They argue this would mean a graduate earning £35,000 would see their monthly repayments cut in half within three years and that, over the lifetime of their loan, lower earners would save up to £5000.

These reforms could also benefit public sector workers, as the plan would mean nurses, doctors, teachers, police officers, and armed forces personnel could see part of their student loans written off after 10 years of public service.

“This would help tackle the recruitment and retention crises in the NHS and schools, while rewarding those who commit to public service”, said the Liberal Democrats.

As well as introducing these reforms, they also called for the introduction of structures that would implement long-term changes, for example creating an independent watchdog to oversee student loan repayments to prevent governments from changing the terms of the agreement.

They also would introduce a Royal Commission to “build a cross-party consensus on a fairer, more stable student finance system”.

The Liberal Democrats have directly addressed criticism linked to their decision to backtrack on an election promise not to increase tuition fees in the 2010 coalition government.

They recognised the “heavy political price for making promises on tuition fees we couldn’t keep” but argued that they have learned from these mistakes, presenting their policy as a “a pragmatic, costed and achievable plan that would make a real difference to graduates now, while also fixing the system for the long term”.