Tories pledge to cut ‘eyewatering’ interest on some student loans
The Conservative party has pledged to slash some of the interest paid on student loans issued up until 2023 amid growing opposition around the crippling amount of student debt.
Tory leader Kemi Badenoch said the Plan 2 loans system – which around 5.8 million took out loans under between 2012 and 2023 – “increasingly feels like a scam”.
The current system places loan interest at the rate of the Retail Prices Index (RPI) plus up to three per cent, depending on the graduate’s earnings.
But the Tories have proposed capping the interest at RPI only, which is currently 3.8 per cent, in a bid to help a higher number of students pay off their debts.
The push to ease the burden on young people – launched by Badenoch in today’s Sunday Telegraph – comes as Chancellor Rachel Reeves faces renewed demands to ease the pressure for students following a campaign by experts and the National Union of Students.
Stride source: ‘We have to give people some hope’
The Tories have also pledged to lift the cap on apprenticeship subsidies for employers, arguing it would bring people into the workforce earlier.
They also have also proposed giving employers up to £5,000 for each 18 to 21-year-old British citizen apprentice an employer takes on.
The move was floated by shadow Chancellor Mel Stride in his 2024 leadership campaign for Tory leader. The Central Devon MP made a promise to young people in his speech at the Conservative Party conference to help “get debt off your back”.
A source close to Mel Stride said: “There is a palpable sense of unfairness – and even despair – among some people that they’ve done all the right things and are getting screwed. We’ve talked a lot about things like getting the benefits bill down, but Mel wants to focus on the people who are paying for all that as well.
“People who went to uni, got a decent job and find themselves with sometimes ridiculously high marginal tax rates. They’re paying eyewatering interest on their student loans to subsidise others doing low quality degrees who will never repay. It ends up being not just unfair but really bad economics too – people start to think ‘what’s the point’. We have to give people some hope.”
Youth unemployment fears spike
Education Secretary Bridget Phillipson said on Sunday the government would “look at” the student loans system adding she wanted “fairer” arrangements but refused to commit to any changes.
The salary threshold at which repayments kick in under the Plan B system will be frozen at £29,385 for three years following Reeves’ November Budget, meaning many graduates would have to pay more.
This week the government came under fresh scrutiny amid the surge in youth unemployment, with experts pointing to the relentless hikes in the minimum wage.
Just north of 16 per cent of people aged 16 to 24 are registered as unemployed compared to the national average of just over five per cent. In the final quarter of 2025, joblessness among young people soared to 740,000 hitting an 11-year high.
Increases to the minimum wage – which will rise 4.1 per cent to £12.71 for those over 21 and 8.5 per cent to £10.85 for 18 to 20-year-olds in April – has been cited as one of the biggest cost pressures for employers.
Labour had promised ahead of the 2024 General Election to ditch “discretionary age bands” but criticism around the move has amplified after fresh job figures this week confirmed young people are the most likely to struggle in the UK jobs market.
The Prime Minister said the government would stick to its manifesto commitment to equalise the minimum wage despite speculation it would row back on the pledge over unemployment fears.
Labour had promised ahead of the 2024 General Election to ditch “discretionary age bands” aligning the minimum wage for 18 to 20-year-olds with those over 21.