Abolish Student Loan Interest

The paper does not propose writing off student loans. It proposes ending interest, including interest already accrued, for British nationals resident in the United Kingdom. Borrowers would apply to the Student Loans Company with proof of citizenship and proof of residence. Repayment thresholds and the income-based repayment system would stay; more of each payment would cut the principal.

It argues that many graduates now repay without the balance falling, which delays home ownership, saving and family formation. It cites about £13.36 billion of interest accrued across the loan system in 2025–26, against about £5.94 billion repaid in total. Only 39% of the final Plan 2 cohort in England are forecast to repay in full.

On fiscal cost, the paper is explicit that £13.36 billion is not the annual cost to the Treasury, because much accrued interest is never collected. An indicative slice associated with borrowers inside the tax system who actually repaid is put at about £5.46 billion, and even that overstates lost receipts. A real costing, it says, needs a Department for Education zero-interest model.