Student loan crisis in England and Wales is a scam on graduates, say angry MPs

Angry backbench Labour MPs have attacked ministers over the student loans crisis, claiming graduates are being “outrageously scammed”.Ahead of a Commons Westminster Hall debate on Wednesday morning, some Labour MPs joined calls for an urgent shake-up of the current “unfair” system.Their intervention comes days after the education secretary, Bridget Phillipson, conceded there were “problems” with the current arrangements amid growing anger about the plight of millions of graduates saddled with ballooning debts.At the heart of the row are the estimated 5.8 million students from England and Wales who took out a “plan 2” student loan between 2012 and 2023.Many graduates are handing over money from their salary every month to repay their loan, but everything that is taken is dwarfed by the interest that is added to their debt, and as a result the sum they owe is getting bigger.The catalyst for the row was the decision last November by the chancellor, Rachel Reeves, to freeze the salary threshold for plan 2 loan repayments for three years – seemingly in defiance of the original declaration in 2010 that the threshold would “be uprated annually in line with earnings”.In recent days, the Conservatives and Liberal Democrats have outlined what they would do to fix the system, while the consumer champion Martin Lewis and the National Union of Students are among those spearheading the demands for action.Lewis this week clashed on air with the Conservative leader, Kemi Badenoch, over the issue on ITV. He later apologised.Some of the Labour MPs expected to participate in the debate provided comments to the NUS.Alex Sobel, member for Leeds Central and Headingley, said: “People on the plan 2 student loan are being outrageously scammed and burdened with unattainable debt levels and interest rates on their student loans.”Sobel, who is co-chair of the all-party parliamentary group (APPG) for students, added: “To be charged interest from the very first day they began their course, while studying full-time, takes advantage of people’s ambitions to learn.”Jas Athwal, the MP for Ilford South who called the debate, said: “The student loan system is littered with unfairness, and while that wasn’t of this government’s making, that does not legitimise making the system more unfair.”Abtisam Mohamed, who represents Sheffield Central and co-chairs the APPG for students, said that across the UK, graduates were speaking out about a system that feels “stacked against them”.She added: “As the MP for a constituency that is home to two world-class universities, I have sat down with students and graduates from Sheffield Hallam and the University of Sheffield who are facing spiralling debts that keep growing, even as they make repayments …“I am gathering the stories of those affected so I can take them to parliament and push to scrap these unfair interest rates.”At the weekend, Phillipson said the system of plan 2 loans had “problems” but suggested the government’s priority would be maintenance grants for poorer students, rather than tackling the high interest rates. However, she added: “We will continue to keep under review the ways in which we can make life better for graduates, including through this system … I’ll keep looking at this.”Responding to the MPs’ comments, a government spokesperson said: “We inherited the student loans system, including plan 2, which was devised by the previous government. Threshold freezes have been introduced to protect taxpayers and students now, alongside future generations of learners and workers.“The student finance system protects lower-earning graduates, with repayments determined by incomes, and outstanding loans and interest being cancelled at the end of repayment terms.”