Tories Pledge to Scrap Debt Trap of High‑Interest Student Loans

Published: 23 February 2026 . The English Chronicle Desk. The English Chronicle Online

The Conservative Party has announced a major new pledge to tackle what its leadership describes as an “unfair debt trap” for millions of British graduates, vowing to scrap high interest rates on student loans and ease the financial burden on borrowers if elected to government. The proposal was set out by Kemi Badenoch, who said the current system leaves many paying more in interest than they ever reduce from the underlying balance.

Badenoch’s focus is on the so‑called Plan 2 student loans, taken out by an estimated 5.8 million borrowers who studied between 2012 and 2023. Under the present rules, interest on these loans is charged at the Retail Prices Index (RPI) plus up to three percentage points, meaning debts can grow even while graduates are making regular repayments. Critics argue this creates a situation where balances barely decrease over time, effectively trapping borrowers in long‑term debt.

Writing in the Sunday Telegraph, Badenoch said the Conservatives would cap interest at RPI only, removing the extra percentage points that push charges above broader measures of inflation and contribute to growing balances. She described the current arrangement as something that “increasingly feels like a scam” and said reducing interest would help more graduates see real progress in paying off their loans.

The announcement is part of a wider package dubbed a “new deal for young people”, which could also include cuts in some university places to fund apprenticeships and housing incentives for first‑time workers. Under this plan, the number of undergraduate places could be cut by about 100,000 a year, freeing up funds that Conservatives say would help support reduced student debt costs and boost alternative training pathways.

The pledge comes amid rising frustration over student loan repayments and the impact of recent budget decisions, including a freeze on the repayment salary threshold — meaning more graduates may begin repaying sooner or see slower reductions in their balances. Deputy Prime Minister and Shadow Education Secretary Laura Trott has echoed concerns about the fairness of current terms, particularly for younger workers who struggle to pay down debt while also facing rising costs of living and housing.

Labour ministers, however, have urged caution, arguing that addressing student debt requires careful prioritisation of public finances. Bridget Phillipson has acknowledged problems with the current system — especially high interest charges — but indicated the government would focus first on measures such as restoring maintenance grants for low‑income students, rather than immediate wholesale changes to loan terms.

Opposition parties including the Liberal Democrats have also weighed in, calling for broader reforms. They have urged the creation of an independent review to explore long‑term solutions, from adjusting interest measures entirely to increasing support mechanisms for all students.

With millions of borrowers still carrying large debts decades after graduation, student finance has become a politically potent issue. The Conservatives’ proposal — while framed as a remedy to unfairness — is likely to spark debate over funding priorities, the future of university access, and how best to balance support for graduates with broader economic objectives as the next election approaches.

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