Martin Lewis blasts ‘morally wrong’ Rachel Reeves over threshold | Personal Finance | Finance

Martin Lewis has called out ‘morally wrong’ Chancellor Rachel Reeves over plans to freeze the student loan repayment threshold.

The Money Saving Expert founder slammed the Chancellor this morning over the freeze on the Plan 2 student loan repayment threshold and called on the government to ‘reverse the decision’.

The Plan 2 repayment threshold, which affects those who started university after 2012 and who left before 2024, will rise to £29,385 a year from April 2026, and will then be frozen at that level until 2030.

It means that, as wages rise, more and more people will pay more money back in student loan repayments, including some who will not earn enough to actually pay them off, but will still lose more money every month.

Martin said that the repayment threshold freeze is a ‘one-sided breach of contract’ and that private lenders wouldn’t be allowed to do it.

Martin explained on Twitter that the freeze will hit the lower earners the hardest, adding: “About to go on @GMB to argue why Chancellor is morally wrong to freeze the Plan 2 student loan repayment threshold, and should reverse the decision…

“…while in practice for most with that loan it works like a graduate tax, it was deliberately set up and sold as a loan contract (both so the wealthy didn’t need get it and so if you move abroad you still owe it).

“Freezing the threshold is a one-sided breach of contractual terms. No commercial lender would be allowed to do it, the FCA would strike it down. The government shouldnt be allowed to do it either, it should at the very least stick to the terms it agreed with students when they took out their loans.

“This freeze hits lower- and middle-earning graduates the hardest. They will end up repaying, at a guesstimate, £300/yr more due to it and do so for the rest of their loan’s 30-year life.

“While the highest earners will pay more each year too, at least for them it’ll mean they’ll clear the loan earlier so repay less interest.”

The Education Secretary has said she will “look at” Plan 2 student loans amid widespread concerns over repayment costs, but refused to commit to changing the system.

Bridget Phillipson insisted she wanted “fairer” arrangements for graduates but warned that the Government was dealing with “a question of priorities” when asked whether the burden would be eased.

Following Chancellor Rachel Reeves’ November budget, the salary threshold at which repayments kick in under the Plan 2 system will be frozen at £29,385 for three years, leading to many having to pay more.

Interest on these loans is charged at the rate of Retail Prices Index (RPI) inflation plus up to 3%, depending on how much a graduate earns.

The Tories have pledged to limit this to RPI only while cutting the number of university entrants and increasing apprenticeships, in a move that will heap further pressure on the Treasury.

Speaking to broadcasters on Sunday, Ms Phillipson said it was “galling that the very people who designed, implemented and delivered that system are now complaining about the fundamental problems that they see within it”.

Asked whether the Government would change the Plan 2 system, over which critics have accused the Treasury of acting like a “loan shark”, she told the BBC’s Sunday With Laura Kuenssberg: “I will look at it, of course I will.”

Shadow education secretary Laura Trott said the Tories wanted funding to be scrapped for “dead-end university courses”, which she said were leaving graduates with weaker job prospects.

Under Conservative plans, young people starting their first full-time job would also see the first £5,000 of national insurance they pay put into a personal savings account, which could be used to buy a home, the party says.

Tory leader Kemi Badenoch said: “Plan 2 student loans are an unfair debt trap: millions of graduates are doing the right thing, paying every month, yet watching the balance they owe growing bigger because interest piles on faster than repayments.

“If Labour had any sense, Rachel Reeves would act now and use her spring statement to adopt this plan.”

The Liberal Democrats, who along with the Tories lifted the cap on tuition fees and introduced the Plan 2 system during the Conservative-led coalition government in the 2010s, have also pledged to cut costs.

The party has called for the threshold freeze to be scrapped and for the creation of a royal commission to consider longer-term changes, including replacing RPI with a “fairer” rate.

Lib Dem universities spokesman Ian Sollom said: “My party paid a heavy price for making promises on tuition fees that we couldn’t keep.

“We’ve learned from that, which is why today we’re setting out a proposal that is pragmatic, deliverable, and would make a real difference.

“But the system also needs fundamental reform that lasts beyond any single parliament.”