In Tuesday’s Spring Forecast, the government chose not to make further changes to the student finance system, following weeks of cross-party debate on what should be done to address growing student debt amidst a faltering financial position for the higher education system.
The chancellor’s rumoured changes would have made the seventh policy change to student finance since Plan 2 loans were introduced in 2012. Each of these successive changes has had distinct effects on different groups of both students and graduates, as well as higher education providers and government spending.
This series of changes has come in the form of tweaks to the various policy features of the student loan system: the thresholds, rates, terms, and size of the loans that students take. The Institute for Fiscal Studies’ student finance calculator allows us to see the impact of any changes to these features across the spectrum of graduate earnings. What quickly becomes clear is that each adjustment to the system brings about its own risks and trade-offs.
It is little wonder then why successive governments have made consecutive changes to the student loan system. In political terms, student finance is seen as something of a zero-sum game. Each change that brings net cost relief to graduates is offset by increased cost to the taxpayer or increased pressures on providers. And any cost-neutral change tends to either involve trade-offs between higher or lower earning graduates, or between the amount paid now and the total debt or lifetime repayment. Even proposals to introduce contributions from employers do not come without their own risks. As such, any change raises new questions around the apparent fairness of the repayment system.1
These persistent tensions mean that alongside government changes to the system there has been a constant drip-feed of proposals to ‘fix’ the system by adjusting the loans system from political parties, commentators, and others both inside and outside the education sector. Our contribution is to focus on the essential principles that should underpin any effective reform: sustainability, equity and clarity.
Sustainability
Firstly, reform must be situated within a broader post-18 education strategy that is sustainable. Despite multiple attempts by recent governments to increase provision of sub-degree (level 4 and 5) courses, participation rates are still falling. Along with degree apprenticeships, these alternative pathways have the potential to play a crucial role in meeting labour market needs and expanding opportunity. Our research has shown that degree apprenticeships in particular offer extremely promising benefits to students and employers but are currently not living up to their potential for social mobility.2 The question is not whether these routes should exist, but how they are funded, supported, and positioned alongside traditional degrees.
Ideally, greater participation in post-18 education could come through greater upfront financial support that has the potential to reduce overall costs through shorter provision. This could come in the form of employer incentives for degree apprenticeships, or lower fees for the first two years of higher education provision (balanced with higher costs for year 3). There are also less popular options such as minimum entry standards being used to access full undergraduate degrees, a policy proposed by the last major review of higher education funding but ultimately dropped due to concerns about the disproportionate impact on disadvantaged groups. Introducing minimum entry standards to access undergraduate degrees would therefore need to be implemented alongside a major push on broader support for disadvantaged students to compensate for potential negative impacts on this group.
Equity
Correspondingly, any reforms to loans must take the broad view of how the education system is contributing to social mobility. For example, one of the key drivers of the lower participation of disadvantaged students is the lower grades those students receive at 18. The gap between disadvantaged students and their non-disadvantaged peers now sits at 3.3 grades, with little progress made over the last decade.3 It is likely no coincidence that funding for disadvantaged students drops by around a third after students receive their GCSEs. Addressing this hidden inequity will likely do more to widen higher education participation and improve social mobility than changes to student loan repayments. We set out how such a ‘student premium’ for disadvantaged students in post-16 education might look in a recent report.4
Nevertheless, progressivity and shared contribution should remain core design features of the system. Repayments should continue to be structured so that those who benefit most financially from higher education contribute more towards its costs over their lifetimes.
Clarity
Clarity and transparency must be central to any reform. Prospective students should be able to understand what taking on student finance means in practice: how much they are likely to repay, over what timeframe, and under what conditions. A system that relies on complex repayment mechanisms that are subject to frequent changes undermines informed decision-making and risks deterring participation, particularly among students from disadvantaged backgrounds.
Plan 2 graduates can legitimately raise concerns that post-hoc changes to loans have left them worse-off than expected, with a corresponding impact on trust in the system. Analysis from the IFS shows that lifetime losses for middle-earning graduates resulting from changes since they applied to university now amount to around £22,000.5 Whatever the current government does, it must ensure that it builds in some stability for existing and future graduates. Whilst it is true that other loans and taxes can be changed retrospectively, graduates cannot easily change their behaviour to take account of these changes – they made the decision to take on the loan many years ago, and they cannot move their loan to another provider offering more favourable terms.
The government should consider whether more independence for the loans might both reduce volatility in the loan terms and conditions and improve public trust in the system. Independent bodies, such as the Low Pay Commission which advises the government on the effects of changes to the National Minimum Wage, provide a clear model for this political separation. An independent body for student finance would make recommendations to government on advisable changes to the system, taking into account the impact on different groups.
Taken together, these principles point to the need for a student finance system that is transparent, progressive, and integrated with wider education and skills policy. Short-term savings achieved through technical adjustments risk harming progress on widening access and damaging outcomes for students, particularly those from disadvantaged backgrounds.
- Tim Leunig, Undergraduate fees revisited, HEPI Debate Paper 39, 2024.
- Robbie Cruikshanks and David Robinson, Youth degree apprenticeships: An alternative to university?, EPI, 2025.
- EPI Annual Report 2025.
- Emily Hunt, Closing the Forgotten Gap: Implementing a 16-19 Student Premium, EPI, 2024.
- Kate Ogden, How do Plan 2 student loans work, and how have they changed over time?, IFS, 2026.
