Badenoch Cuts Student Loan Interest to RPI – Edinburgh 2026

Key Points

• Conservative Party leader Kemi Badenoch has pledged to limit interest on Plan 2 student loans to the retail price index (RPI) only, removing the additional up to 3% charge based on graduate earnings.
• This move aims to help more graduates pay off their debt amid concerns over high costs, described by Badenoch as feeling like a “scam”.
• The policy would heap pressure on the Treasury, following Chancellor Rachel Reeves’ November budget which froze the repayment salary threshold at £29,385 for three years, forcing many to pay more.
• Interest on Plan 2 loans (for those starting university from 2012 to 2023) is currently RPI plus up to 3%, depending on earnings.
• Conservatives plan to cut university entrants by 100,000, saving £3.6 billion to fund extra apprenticeships for 18- to 21-year-olds as part of a “new deal for young people”.
• Young UK citizens starting their first full-time job would have the first £5,000 of national insurance paid into a personal savings account for uses like buying a home.
• Chancellor Rachel Reeves suggested reducing student loan interest by bringing down inflation, stating: “By getting inflation down, we can also reduce the interest on student loans and I think that will make a big difference in making that more affordable.”
• Campaigners have accused the Treasury of acting like a loan shark; Labour’s deputy leader Lucy Powell called existing Plan 2 interest rates “egregious” and unfair.
• Badenoch made the announcement at the Scottish Conservative Party conference at Murrayfield Stadium, Edinburgh.
• In a Telegraph article, Badenoch wrote: “I am horrified at what graduates today are dealing with, and this is one of the reasons millions of young people feel they’ve been stitched up.” She added: “Plan 2 student loans, the system most people who started university from 2012 to 2023 are on, increasingly feel like a scam.”
• Badenoch further stated: “If we want a country that rewards work, builds skill, and restores pride in practical achievement, we have to stop looking down on the very training routes that build the country.”

Edinburgh (Edinburgh Daily News) February 25, 2026 – Conservative Party leader Kemi Badenoch has pledged to slash interest rates on Plan 2 student loans, capping them at the retail price index (RPI) to ease the burden on graduates facing what she calls a “scam-like” system. Speaking at the Scottish Conservative Party conference at Murrayfield Stadium in Edinburgh, Badenoch outlined the policy as part of a broader “new deal for young people”, amid growing backlash against high loan costs following Chancellor Rachel Reeves’ budget measures.

The announcement intensifies political pressure on the Treasury, with the Conservatives arguing it would enable more graduates to clear their debts. Plan 2 loans, affecting most students who began university between 2012 and 2023, currently accrue interest at RPI plus up to 3% based on earnings, a rate campaigners have likened to loan sharking.

What Changes Did Kemi Badenoch Propose for Student Loans?

Kemi Badenoch’s pledge targets the interest mechanism directly. As reported across multiple outlets including The Independent and AOL, the Conservative leader committed to restricting Plan 2 loan interest to RPI only, eliminating the earnings-linked top-up.

In an article for The Telegraph, authored by Kemi Badenoch herself, she declared:

“I am horrified at what graduates today are dealing with, and this is one of the reasons millions of young people feel they’ve been stitched up. Plan 2 student loans, the system most people who started university from 2012 to 2023 are on, increasingly feel like a scam.”

Badenoch addressed the conference audience, photographed by Jane Barlow for PA Wire and featured in AOL coverage, emphasising how the current system discourages practical training. She wrote in The Telegraph:

“If we want a country that rewards work, builds skill, and restores pride in practical achievement, we have to stop looking down on the very training routes that build the country.”

This reform, the Tories claim, would allow higher numbers of graduates to repay their loans fully, countering the debt accumulation driven by high interest.

Why Is There Pressure on Student Loan Repayments Now?

Chancellor Rachel Reeves’ November 2025 budget has fuelled discontent by freezing the repayment threshold at £29,385 for three years. As covered by The Independent, this freeze means many graduates must start repaying sooner and pay more, regardless of inflation or wage growth.

Reeves responded to the backlash earlier this month, as reported by The Independent:

“By getting inflation down, we can also reduce the interest on student loans and I think that will make a big difference in making that more affordable.”

Campaigners have been vocal, accusing the Treasury of predatory practices. Labour’s deputy leader Lucy Powell, quoted in The Independent, described Plan 2 interest rates as “egregious” and the burden as unfair, highlighting the disparity for borrowers.

The Sunday Times, as referenced in The Independent’s reporting, noted the Conservatives’ counter-proposal ties loan relief to broader youth reforms, aiming to redirect resources from higher education.

How Does Plan 2 Work and What Makes It Controversial?

Plan 2 loans apply to English students who started university from 2012 to 2023. Interest is RPI plus up to 3%, varying with graduate earnings, per details from The Independent and AOL.

This structure has drawn fire for ballooning debts; many graduates see balances grow despite repayments. Badenoch’s cap at RPI would stabilise this, though it still trails behind inflation at times.

AOL’s coverage, drawing on PA Wire imagery from the Edinburgh conference, underscores Badenoch’s framing of the system as exploitative, aligning with widespread graduate frustration.

What Is the Conservatives’ “New Deal for Young People”?

Beyond loans, Badenoch’s package includes halving university entrants by 100,000, saving the Government £3.6 billion annually, according to The Sunday Times report cited by The Independent.

These savings would fund equivalent apprenticeships for 18- to 21-year-olds, promoting vocational paths over degrees. The Sunday Times detailed this as a core element of the “new deal”.

Young UK citizens entering their first full-time job would also see the first £5,000 of national insurance contributions diverted to a personal savings account, usable for home purchases or similar, as outlined in Conservative plans reported by The Independent.

This holistic approach positions the Tories as champions of working youth, contrasting with perceived Labour neglect.

How Has Labour Responded to the Student Loan Crisis?

Rachel Reeves has pivoted to inflation control as her fix, reiterating in recent statements covered by The Independent that lower inflation would naturally cut interest burdens.

Lucy Powell’s critique of “egregious” rates, as per The Independent, signals internal Labour tensions, though the party defends the freeze as fiscally necessary post-budget.

No direct rebuttal to Badenoch’s pledge has emerged yet, but it piles pressure on Reeves amid Treasury strains.

What Do Campaigners Say About Current Loan Rates?

Student advocates have branded the Treasury a “loan shark”, a phrase echoed in The Independent’s analysis of Plan 2 mechanics. They argue rates exceed commercial lending, trapping borrowers in perpetual debt.

Badenoch’s proposal resonates here, though critics may question its funding without university cuts.

Where and How Was the Pledge Announced?

The pledge came at the Scottish Conservative conference in Edinburgh’s Murrayfield Stadium. Jane Barlow’s PA Wire photograph, used in AOL articles, captures Badenoch addressing delegates, linking the policy to Scottish youth concerns.

The Independent’s US edition and main site aggregated coverage, tying it to UK-wide debates.

What Are the Potential Impacts on Graduates and the Treasury?

For graduates, RPI-only interest could mean thousands saved per borrower, accelerating debt clearance. The Tories project broader repayment success rates.

Treasury costs rise short-term, but university reductions offset via £3.6 billion savings. Apprenticeship expansion might yield long-term economic gains through skilled workers.

Badenoch’s Telegraph piece frames this as restoring fairness, decrying how degrees saddle youth while apprenticeships are undervalued.

Could This Policy Win Over Young Voters?

Polls suggest youth disillusionment with both parties on costs; Badenoch targets this with practical incentives. National insurance savings for home-buying taps housing woes.

Labour’s inflation bet hinges on economic delivery, but frozen thresholds irk payers now.

As politics heats ahead of elections, Badenoch’s pledge reframes Conservatives as youth allies.

What Broader Reforms Are Conservatives Pushing?

The package signals a vocational shift: fewer uni spots, more apprenticeships, loan tweaks, and savings pots. Badenoch’s rhetoric elevates “practical achievement”.

This challenges Labour’s higher education emphasis, potentially reshaping skills policy.