LBC callers react to the student debt 'scam'

The Chancellor has told LBC the student loan system is "fair" - but LBC callers Elliott (00:00) and Kieran (04:30) beg to disagree.

Rachel Reeves insisted that the whole point of the student loans system, which was changed by the Conservative-Lib Dem government in 2012, was that the more you earn, the more you pay.

5.8 million people who took out a student loan between 2012 and July 2023 are on a Plan 2 repayment plan, which sees interest at RPI inflation - plus up to three per centage points depending on earnings.

In contrast, people with loans on ‘Plan 1’ before 2012, pay interest at RPI or the Bank Rate plus one percentage point - whichever is lower.

Tuition fees were tripled to around £9,000 at around the same time, meaning most students were forced to take out big loans to fund their higher education - unless they could afford to pay upfront.

Ms Reeves insisted that the system was "fair".

She told LBC: "Well, it is important that you don't have to start paying back the student loan until you earn enough money.

"And that is the point of the student loan system, that you get the loan, you get that great university education and you only pay it back if you afford, if you can afford to do so.

"And obviously after a period of time, that gets written off entirely.

"So if you are able to get a job that pays a good wage, you'll pay that money back quicker.

"But if you're never able to repay, that loan will eventually be written off. I think that is a fair system.

"Around half of people go to university today, but half don't. And it is not right that people who don't go to university are having to bear all the cost for others to do so."

This week, House of Commons Library data revealed more than £15bn in interest was added to the total amount of student debt owed in 2024-25. Only £5bn was repaid.

The total amount of student debt owed to the government has soared to £270billion, according to government figures.

The government estimates that just half of students will pay back their loans in full, as it's written off after 30 years.

Last week LBC pressed Jacqui Smith, the minister for higher education, on whether she believed it was a scandal.

Rejecting the suggestion, she said: “What we know about a university education in the UK is that you will earn considerably more during the course of your lifetime than if you don't benefit from a university education.

“It's therefore fair that we have a system where you pay back the benefit that you have achieved as a graduate.“Of course, we need to make sure that's done in a way that supports people and is affordable and that's why this is a very different sort of debt to any other debt that you will take on.

"You only pay when you earn above a certain amount. You only pay a set proportion of your income above that amount and if you get to the end of the repayment period and you haven't paid it off, that is a write off."

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