MP backs Government action to protect graduates from rising student loan costs

Preet Kaur Gill MP for Birmingham Edgbaston, has welcomed new action from the Government to bring greater stability to the student loan system and protect graduates from rising interest costs.

From September 2026, interest rates on Plan 2 and Plan 3 student loans will be capped at 6%, ensuring borrowers are not exposed to sharp increases driven by inflation.

In places like Edgbaston, home to institutions such as the University of Birmingham, this will make a meaningful difference. Thousands of students and graduates currently face a system where interest can rise above inflation, meaning loan balances grow even while repayments are being made.

The cap provides certainty at a time when many young people are already navigating high living costs, from rent and energy bills to everyday essentials. Without intervention, temporary spikes in inflation can significantly increase the long-term cost of student debt, particularly for middle earners who repay over a longer period.

By limiting interest rates, the government is reducing the risk of debts escalating unpredictably and helping graduates better plan for their financial future whether that’s saving for a home, starting a family, or building a career.

The change builds on earlier reforms, including raising the repayment threshold for Plan 2 loans to £28,470 in April 2025 and £29,385 from April 2026, meaning graduates can earn more before they begin repayments.

Preet Gill MP for Birmingham Edgbaston, said:

“Students and graduates in my constituency want a system that is fair, predictable and recognises the pressures they are under.

Too many have seen their loan balances grow faster than they can repay, not because of anything they’ve done, but because of wider economic pressures.

This change brings much-needed stability. It ensures graduates are protected from sudden increases in interest and can plan their futures with greater confidence.

With a large student population in our area, including at the University of Birmingham, this is about backing aspiration while making sure the system works fairly for those who rely on it.”

The move also reflects wider efforts by the government to support students and improve access to higher education, including the reintroduction of targeted maintenance grants for those from lower-income backgrounds.

Prime Minister Keir Starmer has set out a broader ambition to expand opportunity, with a focus on both university and high-quality apprenticeships, ensuring more young people can succeed without being held back by financial barriers.

At a time of global economic uncertainty, the government says the priority is clear: protect working people, provide stability, and ensure that those investing in their education are not unfairly burdened by forces beyond their control.

Minister for Skills, Jacqui Smith, said:

“We know that the conflict in the Middle East is causing anxiety at home, and while the risk of global shocks is beyond our control, protecting people here is not.

“Capping the maximum interest rate on Plan 2 and Plan 3 student loans will provide immediate protection for borrowers, supporting those who are most exposed within this already unfair system.