Student Debt Crisis Ignites Political Firestorm Over Graduate Tax Injustice
Demonstrators gathered in Parliament Square, London, for a march against student university fees in 2014, highlighting a growing generational divide. Photograph: Rob Stothard/Getty Images. The issue of student debt has escalated into a full-blown political crisis, with graduates in England and Wales facing what many call a stealth tax that disproportionately burdens the young.
Martin Lewis Leads Revolt Against Student Loan Changes
Never go to war with Martin Lewis. The financial guru behind moneysavingexpert.com commands quasi-godlike status in Britain, trusted by millions with their finances in a way politicians can only envy. When Lewis joined the revolt against recent changes to the student loan system, urging young graduates to lobby their MPs, trouble was inevitable. His influence has amplified calls for reform, putting pressure on Westminster to address the mounting discontent.
Political Backing for Debt Forgiveness and Reform
Last week, Green party leader Zack Polanski called for "a conversation about student debt forgiveness," echoing sentiments from young Democrat voters in the US. Shortly after, five former education secretaries, including Labour's David Blunkett, publicly backed a Sunday Times campaign for more modest reforms to student finance. This slow-burning anger among Plan 2 graduates—those who attended university in England and Wales between 2012 and 2023—is now setting Westminster alight, as they grapple with higher interest rates than their predecessors or successors.
Generational Injustice: Graduates Squeezed Harder Than Super-Rich
Student loan repayments of up to 9% mean some Plan 2 graduates face effective marginal tax rates of 49% or more. In contrast, even the super-rich pay only 45% in England and Wales. This generational injustice rankles deeply: why are young people being squeezed proportionately harder than their bosses? With challenges like saving for a first home or starting a family, additional financial burdens feel like millstones around their necks.
Bottomless Pit: Growing Debts Despite Repayments
Many graduates face the dispiriting reality of throwing money into a bottomless pit. Only the highest earners can outrun galloping interest rates to clear their loans, leaving others to see their debts grow despite years of payments. Interest continues to accrue even during maternity leave. Labour backbencher Nadia Whittome, 29, highlighted this by noting she has only reduced her £49,600 debt by £1,000 after six years on an MP's salary. Debts are written off after 30 years, but that means payments can extend well into middle age for decisions made in sixth form.
Chancellor's Decision Sparks Backlash
What tipped rebellious graduates over the edge was Chancellor Rachel Reeves' budget decision to freeze the repayment threshold at £29,385 for Plan 2 until 2030, squeezing millions more from them. Reeves argued graduates are better off due to falling interest rates, but Lewis countered that moving the goalposts isn't "a moral thing" to do. The Greens, who promised to scrap student loans in their manifesto, are capitalizing on this anger, with YouGov polls showing an emerging lead over Labour among under-30s.
Rising Debts and Competitive Job Market
Student debt forgiveness was once absent from political conversation in Britain, but now, with average debts of £53,000—higher than in the US—it's a pressing issue. Young people feel panicked into pursuing master's degrees to bolster CVs in a hideously competitive jobs market. The backlash is likely to grow as post-2023 students graduate into a market with insufficient graduate opportunities, exacerbated by AI gobbling up entry-level work.
University Careers and Long-Term Repayments
At a recent university careers fair, impressive students faced rejection after rejection, highlighting the disconnect between education costs and job prospects. Younger graduates, while facing lower interest rates, start repaying at £25,000—dangerously close to minimum wage—and have debts written off only after 40 years, potentially paying into their 60s.
Fair Solutions and Systemic Shake-Up
Britain may be entering a painful transition toward higher taxes to fix public services and bolster defenses. However, starting by squeezing the young, rather than those who benefited from better times, feels backwards. The fairest option is likely capping lifetime repayments to align loans with actual borrowing, not a stealth graduate tax. This would require a shake-up of the university system, including shorter, cheaper degrees or more apprenticeships, though these need a growing economy to create real opportunities.
If the government has better options, it's time to hear them. The young, unsurprisingly, are in a hurry for change. Gaby Hinsliff is a Guardian columnist.
