Powell says the student loan system is at the top of her in-tray

Lucy Powell says she wants to make sure the student loan system is “fair” and the issue is at the top of her agenda as the new education secretary.

Labor’s deputy leader told the BBC in February that interest rates being paid by graduate students on Plan 2 loans were “disgusting”.

She said she was committed to looking into the matter, although she said she “can’t make any promises” about changes.

Scheme 2 loans were taken out by students in England between September 2012 and July 2023 and are still offered in Wales. Graduates pay 9 percent of what they earn above the pay limit.

In November last year, then chancellor Rachel Reeves announced that the repayment limit for students paying off Plan 2 loans would be capped at £29,385 between 2027 and 2030.

The change will allow students to start repaying their loans sooner and their wages will increase.

Campaigners have called for the decision to be reversed.

Reeves said later Government measures were “just and proportionate” to achieve a “balance between taxes and expenditure”.

In April, the government said it was interested. Some student loans in the UK – including Scheme 2 – are capped at 6%.

Speaking to Matt Chorley on BBC Radio 5 Live, Powell said she was “very aware” of the issue as her eldest son has a Scheme 2 loan.

She said: “I think it’s not just about when people start paying back, but also the RPI (retail price index) and the 3% interest rate.

“I think it’s pretty ugly in the past and I’m not going to change my opinion on that just because I’m secretary of state.

“The government has decided to review that, it’s at a very high level in my entry as foreign minister, and I want to make sure we look at this to be fair to students.”

Powell described the “real cost-of-living issue” for young people, saying, “They’re paying high fees and never paying off the student loan principal.”

Pressed on whether it was something she would look into, Powell replied: “Yeah, I can’t make any promises, but it needs to be looked at.”

Members of Parliament this month in the Treasury Committee He says student loan repayments are being “sold out” by the government, comparing them to phone contracts or cinema tickets.

It came later BBC investigation In a promotional pitch to teenagers a decade ago, the government compared student loan repayments to a £30-a-month phone contract.

Earlier this year, Conservative leader Kemi Badenoch said she would cut the interest rate on Plan 2 loans, which is based solely on RPI. The current RPI rate is 3%.