Ruth Davidson is a member of the House of Lords and co-chair of Prosper UK.
We ask a lot of our young people. To work hard at school. Get the best grades they can. Find an avenue of further study, education, apprenticeship or direct employment. Pay taxes, save, buy a home, perhaps marry and start a family.
But we don’t make it easy for them. And for those who chose to go to university in England – particularly between 2012 and 2023 – we have saddled them with a system of generational unfairness through a student loan system which taxes them for decades.
It is an attack on aspiration, hard work and doing the right thing. That is why Prosper UK has this week launched Fair Fees, a campaign for reform of the student loan system in England. The campaign will support graduates, students and parents who believe the student finance system is unfair, unsustainable and needs urgent reform.
Our Fair Fees website has a loan repayment calculator tool that can provide an estimate on repayments, interest and the amount by which the debt balance could increase. We have also launched a petition that calls on the Chancellor and the Government to commit to changing the broken system. If you are a student, graduate or parent who believes reform is needed then please sign it.
Right now, graduates are paying thousands of pounds each year in repayments, only to see their overall debt grow. This uniquely unfair interest rates regime which students operate under sees around £15 billion of interest added each year. In fact, the Institute for Fiscal Studies says that graduate earnings typically need to reach £66,000 per year before the debt reduces at all.
The result is millions of graduates facing marginal tax rates of 51% once their student loan payments are dumped on top, and faced with a bill they can be paying for either 30 or 40 years, depending on the scheme their repayment is under.
The maths works for no-one. Even the Treasury forecasts that only around a third of Plan 2 loans will ever be fully repaid. When Britain should be going for growth, we are economically shackling a generation at the exact point they should be saving for a deposit on their first home or considering starting a family.
The calls for change are getting louder. There are currently two parliamentary select committee inquiries in this area. The Education select committee is looking at the wider issue of university funding while the Treasury select committee is examining the specific issue of the student fee and loan regimes. Its public survey drew more than 52,000 responses- one of the largest ever received.
We’ve already seen the Conservative position move on this issue, with Kemi Badenoch’s New Deal for Young People advocating the scrapping of real interest on Plan 2 and capping the rate at RPI. This is a good first step, but the IFS is clear- the gains go mostly to higher earners and barely touch the lower fifth. More action is needed.
With parliament and opposition alive to the injustice and advocating change, we see a real need for mobilising the public on this issue, to help force the government’s hand.
So far, the Chancellor has seemed intransigent, even going so far as to call the loan system “fair and reasonable”. At last year’s Budget she froze the repayment threshold at £29,385, dragging more middle earners into paying more for longer on a contract they cannot renegotiate.
So our Fair Fees campaign is designed to be the grain of rice that tips the scale. Mobilising thousands of students, graduates, parents, grandparents and people concerned by a system that works neither for the individual nor the country. As well as adding their name to the petition that we will put in front of the Chancellor, we are also asking for their stories.
We want to be able to show the impact that saddling recent graduates with tens of thousands of pounds worth of debt affects the decisions they take in their life.
One 31 year old who visited our website wrote: “When I left university I owed £37.5k. Now, after 10 years in full-time employment, I owe around £50k. In a typical month I pay around £350. Last month, due to my bonus, it was around £2,500. This year I’ll pay £6.5k towards the loan and then accrue £7k interest, so my balance will actually go up. I’m trying to get on the housing ladder, and this is really affecting my ability to save. If I continue at my current salary, I’ll pay over £100k for my three years at university. I didn’t understand that at the time and, if I had known, I might not have gone.”
A fair system should not trap people in decades of repayments while their balances grow. It should set interest at a reasonable level, protect students from retrospective rule changes and make sure the cost of higher education is shared fairly between graduates and the wider country.
It is not the job of this campaign to write the Treasury’s policy, but any fair settlement should meet a few basic tests. It should:
Work like a loan that can realistically be repaid, not a tax in all but name
Reward work, so that middle earners are not left worse off the harder they try
Share the cost of higher education fairly between graduates and the country that benefits from them
Keep faith with the terms people signed up to, so the rules cannot be rewritten after the event
Give the next generation something better than a longer version of the same problem
Prosper UK’s supporters across the country have raised this as a key issue. This is just one conversation that points towards a bigger issue- intergenerational fairness and the aspiration to succeed.