One of the architects of the student loan system has said that interest rates should be lowered as debate over the loans intensifies.
Nick Hillman was a special adviser to former universities minister Lord Willetts when tuition fees tripled under the government’s “Plan 2” loans, which were created for graduates who started university between 2012 and 2023.
Speaking toThe Times, Mr Willman admitted the system was created in a “mad rush” in 2010 while the government was under pressure from voters to save money. He said: “We’d had a general election where every single major political party … had promised to exempt some areas of public spending.
“They’d said ‘we’re not going to cut pensions and we’re not going to cut defence and we’re not going to cut science’, so the bits of government that were not protected, and that included higher education … had to take swingeing cuts.”
Under the loans, graduates who started between 2012 and 2023 are charged interest at RPI plus up to 3 per cent, despite the Office for National Statistics (ONS) ruling in 2013 that RPI was “no longer fit for purpose”.
Mr Hillman told Times Radio on Sunday that it “makes sense” to change interest rates from Retail Price Index (RPI) to Consumer Price Index (CPI), with RPI being higher than CPI.
CPI is the current official measure of inflation for the UK and is used for taxes and benefits.
“Since we designed the system, the ONS has said RPI should not be used for any government policies. It’s a very bad measure of inflation,” he said.
According to The Sunday Times, No 10 is in talks with the Treasury and Department for Education about how to reform the current student loan system.
In November 2025, chancellor Rachel Reeves announced in her budget that the threshold for which Plan 2 student loans must be paid back would be frozen at £29,385 for three years starting from April 2027, instead of rising with inflation each year. Graduates begin repaying 9 per cent of their income above this threshold.
The freeze means more graduates will start making repayments as they are dragged over the threshold earlier than they would have been if it were rising with inflation.
Last week, a group of graduates dressed as sharks protested outside Parliament and accused the government of acting like “loan sharks”.
Ms Reeves has defended the system, describing it in January as “fair and reasonable”.
The Department for Education was approached for comment.
