What does Andy Burnham’s appointment as Prime Minister mean for student loans?

Andy Burnham was sworn in as Prime Minister at the beginning of this week on Monday, with John Healey named as Chancellor.

Amongst the ideas being explored for his first 100 days are changes to student loan repayments.

This would likely involve increasing the salary threshold for Plan 2 loans, which were taken out by students who began studying at undergraduate level between 2012 and 2023.

Currently, these students pay back 9% of everything they earn above £29,385. As Rachel Reeves announced in last year’s budget, this threshold has been frozen from 2027 until 2030.

MPs on the Committee are urging Healey as Reeves’ successor to […] “to honour the terms and conditions under which those loans were sold to students”

The Commons Treasury Committee has criticised this decision, as it contradicts promises made in 2010 that the threshold for Plan 2 loans would be updated annually in line with inflation.

Since the rate of inflation means that interest has accumulated faster than repayments have decreased the balance, some graduates now owe more than the amount they originally borrowed.

The Treasury Committee’s report stated that the government “took advantage” of the fact that it cannot be legally held accountable for mis-selling, owing to the exemption of its student loan policies from consumer protection laws.

MPs on the Committee are urging Healey as Reeves’ successor to reverse the freezing of the student loan repayment threshold, “to honour the terms and conditions under which those loans were sold to students”.

Students were “mis-sold mortgage-sized debts that politicians can raise repayments on at the drop of a hat”

National Union of Students

The threshold was also frozen by Conservative governments from 2016 to 2018 and then from 2021 to 2025.

Earlier this year, the Government announced a cap on interest rates at 6% from September to protect students with Plan 2 and 3 loans from inflation due to the Iran war.

James Purnell, who used to be Vice-Chancellor of the University of the Arts London, now selected to be Burnham’s chief of staff, has previously advocated for student loan system reforms.

The National Union of Students (NUS) compared the government to a “loan shark”, since students were “mis-sold mortgage-sized debts that politicians can raise repayments on at the drop of a hat”.