Martin Lewis has criticised the new government announcement today, Sunday, September 13
Martin Lewis today said he is holding onto ‘one hope’ following a damning evaluation of the Government in a remarkably candid new statement today. The Treasury today, Sunday, September 13, fell short of committing to abolish the threshold freeze impacting graduates repaying their student loans.
This follows despite growing pressure to take exactly that course of action. Martin Lewis, founder of MSE and a prominent personal finance expert who frequently appears on ITV and BBC, has expressed his exasperation at the development — while clinging to one small glimmer of hope.
In a report released in July, the Treasury Committee called on ministers to pledge to reverse the freeze at this autumn’s budget. The Government has subsequently stated it “recognises” the cost-of-living pressures experienced by many graduates and “understands concerns” regarding the impact of repayment terms, reports the Mirror.
Yet, while it indicated it had not ruled out scrapping the threshold freeze, it has not thus far agreed to take that step. “We keep all aspects of the student finance system under review,” the Treasury said.
“Decisions on student loan repayment arrangements must be considered alongside wider fiscal priorities, the long-term sustainability of the higher education funding system, and the need to ensure value for money for taxpayers.”, reports the Liverpool Echo.
“Any significant changes require careful consideration of their impacts on borrowers, taxpayers and public finances. The Government will continue to consider opportunities to ensure the fairness of the student finance system for borrowers, taxpayers and public finances.”
Taking to X today, Mr Lewis wrote: “This is a very disappointing response that does little to help the millions of students already struggling with student loans, after years of degradation of the terms they signed up to, by successive governments.
“Most urgently, it doesn’t address the coming immoral freeze of the Plan 2 repayment threshold, announced by Rachel Reeves, due to start next April.
“That will mean all those on Plan 2 loans will effectively pay more each year. I say it’s immoral because it is a negative retrospective change of terms to loan contracts students, often aged 18, signed up to. No commercial firm would ever be allowed to do that. The only slim hope is that as the freeze was announced in a Budget, it has to be undone in a Budget and therefore they are just waiting for the coming one to do that.
“At the same time, the Government has sadly rejected the Committee’s recommendation that the ‘fairness’ protections that holders of commercial loans get should apply to student loans too – perhaps as it knows some of the ways it behaves would fall foul of those conditions.
“Most frustrating is that back in 2015, I campaigned for this change, and even worked with current Cabinet Minister, Wes Streeting, then a backbencher, to put an amendment in Parliament (it failed). So, it is incredibly frustrating to see a government he is now a part of reject[ing] it. The Government has also rejected shifting the inflation link from RPI to CPI – continuing the unfair pattern that means when the Government raises our costs by inflation it’s often via the higher RPI, but on things where it pays out it’s often linked to the lower CPI measure.
“Of course, I welcome the small crumbs it has given that at least future students will be told in plain English, before they sign up, that the amount they repay can be altered after the event. But let’s be clear: better information for future students will not fix the existing Plan 2 student loan crisis. The repayment threshold needs to rise, interest needs to fall, maintenance support needs uprating, and the whole system requires a fundamental reset.
“As I say, the one hope here as I say is there is they are waiting to reverse the threshold freeze in the budget. The more fuss that is made now the greater chance of that.”
Ministers have endured months of criticism regarding their management of repayment terms for graduates, particularly those with so-called “plan 2” loans taken out between September 1 2012 and July 31 2023 in England. At last October’s Budget, then-chancellor Rachel Reeves froze the salary threshold at which graduates begin repaying the loan for three years from 2027.
Graduates are expected to be left financially worse off as a consequence, as the threshold would have otherwise increased in line with inflation. When they were first introduced in 2010, the plan 2 loan threshold was designed to rise with inflation each year, but it has been frozen on multiple occasions since 2016.
The Government has pledged to provide greater transparency surrounding the fact that the terms and conditions of student loans can be altered by future governments, after the Commons Treasury Committee warned that the way in which the loans have been presented amounts to mis-selling. Treasury Committee Chair Dame Meg Hillier called on Chancellor John Healey to use the forthcoming Budget to “give graduates some much-needed breathing space”.
Dame Meg said: “The Treasury has not ruled out reversing the threshold freeze but instead says the whole student finance system is under review.
“I recognise that finances are tight but I continue to urge the Chancellor to look at this again. I sincerely hope he will use his upcoming budget to give graduates some much-needed breathing space.”
