- The Labour government caps interest on Plan 2 and 3 student loans to provide Portsmouth’s students and graduates with certainty in an uncertain world.
- Stephen Morgan MP supports decisive action to protect borrowers from the risk of student loan balances rising.
- As the situation in the Middle East risks temporarily increasing inflation, Labour expands protection for working people across Portsmouth.
Stephen Morgan MP has come out in support of a key change the Government has made to the student loan system to deliver stability and protections for graduates from escalating interest.
The Labour government has placed a cap on the maximum interest rates on Plan 2 and 3 student loans at 6% from 1 September, for the 2026/27 academic year.
The measure will protect students and graduates from the potential of inflation pressures due to the situation in the Middle East. Labour’s intervention means graduates will not pay the price for a war which the UK has no direct involvement in.
The reform removes the risk of any temporary increase in inflation causing loan balances to compound at an unsustainable rate, securing stability in the student finance system and protecting hardworking students and graduates at an uncertain time.
Portsmouth’s graduates with Plan 2 loans currently pay interest rates of between RPI and RPI plus 3%, depending on their earnings. Current students at the University of Portsmouth on Plan 2 and Plan 3 also attract an interest rate of RPI +3% while they are studying; there are approximately 125,000 students forecast to be on Plan 2 and Plan 3 loans in 2026/27.
Interest on Plan 2 and 3 student loans will be capped at 6% to protect borrowers. This will protect them from any short-term increase in RPI due to global shocks, such as temporary spikes in oil prices, outside of the government’s control.
It follows changes Labour has already made to the student finance system inherited from the Conservatives to make it fairer for students, graduates and taxpayers in Portsmouth. This includes increasing the repayment threshold for Plan 2 loans to £28,470 in April 2025 – its first increase since 2021. The second increase of the threshold, to £29,385, took place recently.
Commenting, Stephen Morgan, MP for Portsmouth South, said:
“I know just how nervous everyone is about the impact that the situation in the Middle East could have on our economy – that’s the case in Portsmouth, whether you’re a pensioner or a student.
“That’s why Labour is stepping in to shield people in our city’s community. We won’t let our people bear the brunt of a conflict we never started and we refuse to get involved in.
“From support with energy bills to your student loan, boosting your pay to cutting the cost of your childcare, the Labour government is rising to the moment and showing we’re on your side.”
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.
“We’re acting now to defend against the consequences of far-away conflicts in an uncertain world. More broadly, we’re bringing back maintenance grants and continuing to look at the broken Plan 2 system we inherited, and the wider student finance system, to make it fairer for students, graduates and taxpayers.”
Since entering government in 2024, Labour has been committed to supporting the aspiration of anyone who can and wants to attend higher education including through the reintroduction of targeted, means-tested maintenance grants.
The grants will provide students from low-income households with up to £1,000 extra support that will not need to be repaid, to ensure those from the poorest families receive more support without increasing their debt.
The Prime Minister has also made is a personal ambition to get two thirds of young people taking a gold standard apprenticeship or heading to university by the age of 25, restoring prestige to the skills and Further Education system.
Prime Minister Keir Starmer has outlined plans to protect the UK public from the impacts of the conflict in the Middle East, including cutting energy bills, extending the cut to fuel duty, supporting those exposed to heating oil rises and taking back control of our energy security, by investing in clean British energy.
