Kemi Badenoch, the UK’s Secretary of State for Business and Trade, has pledged to reduce interest rates on student loans for graduates under Plan 2 repayment terms, acknowledging a sense of unfairness felt by many who took out loans to finance their education. The move, announced on Sunday, February 22, 2026, aims to address concerns that rising interest rates have left graduates feeling “stitched up” with substantial debt burdens.
The planned cuts will lower the interest charged on student loans, though the exact percentage reduction has not yet been specified. Badenoch’s announcement follows growing pressure from student advocacy groups and opposition parties to alleviate the financial strain on graduates, particularly in the context of a cost-of-living crisis. According to reports from the BBC, the Conservative party is framing the policy as a measure to support young people and address intergenerational fairness.
The Plan 2 loan system, which covers students who began their courses after 2012, has been particularly criticized due to the high interest rates applied to outstanding balances. These rates are linked to the Retail Price Index (RPI) and have recently surged, leading to concerns that graduates will end up repaying significantly more than they originally borrowed. The Independent reports that Badenoch’s pledge is a direct response to these concerns.
While details remain scarce, the government has indicated that the changes will be implemented through adjustments to the interest rate calculation. The Times reports that the government is also considering measures to boost apprenticeships as part of a wider effort to improve skills and opportunities for young people.
The announcement comes as experts warn that graduates are being disproportionately burdened by student loan repayments, particularly in light of government finances. AOL.com highlights concerns that the government is relying on graduates to contribute to public finances, effectively “squeezing” them for cash.
The specifics of the interest rate reduction, including the eligibility criteria and the timeline for implementation, are expected to be outlined in the coming weeks. It remains unclear whether the changes will apply retroactively to existing loan balances or only to new loans issued after the policy takes effect. The government has yet to respond to calls for a comprehensive review of the student loan system, including the RPI-linked interest rate mechanism.
