Response of government to petition “Abolish interest charges on student loans”

Government responded

This response was given on 23 March 2026

Student loans are heavily subsidised by government. To be fair to taxpayers and low earners, those who financially benefit should contribute to the cost. Adding interest to loans is one way to do this

The student finance system removes upfront financial barriers for students entering higher education and remains a deliberate investment in our young people. The Government does not make a profit on the student loan system, rather the student loan system is heavily subsidised by government.

To ensure that the taxpayer, many of whom have not gone to university, are not subsidising an unfair proportion of the cost of student loans, and to protect borrowers who do not go on to be high earners, the student loan system is designed to ensure that those who financially benefit most from their education make a fair contribution towards its cost. Applying interest to student loans is one way that we manage this.

Applying interest in line with inflation ensures that student loans maintain the real value of the loan over the loan term. Removing interest completely would mean that borrowers who go on the repay all, or nearly all of their loan, would repay less, in real terms, than they borrowed.

While interest rates impact the overall amount borrowed and therefore the length of time spent in repayment for borrowers who go on to repay all, or nearly all, of their loan in full, they do not alter the monthly repayment amount for borrowers. Most borrowers are not forecast to repay their loans in full and therefore do not repay the interest accrued on their loan balance. For example, for undergraduate borrowers starting in academic year 2024/25, the average loan balance at the point the borrower becomes eligible to make repayments is £45,600. The estimated average lifetime repayment in real terms is £28,000. Interest rates typically only affect the total amount repaid by mid to high earning borrowers and those with small balances, who will pay back more of their student loans.

This is a conscious decision in the design of the student loan system.

It means that if a borrower goes on to be a high earner, they will contribute more to the cost of their education, while low earners are protected by calculating repayments based on their income and cancelling any outstanding debt, with no detriment to the borrower or their family, at the end of the loan term.

Removing interest rates from student loans would mean that the taxpayer had to subsidise a greater portion of the student loan costs while those who have benefited most from higher education pay less towards its cost.

We inherited the student loans system, which was devised by previous Governments, and we are looking for ways to make it fairer.

Department for Education

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Nothing that we already know lol

Uni should be much cheaper for all. MANY countries make it work.

For example

Austria and Germany take a different philosophical approach to higher education. Instead of treating university as a private investment funded through student debt, they see it as a public good, funded largely through taxation. This means tuition is free or very low, and any loans are limited, often interest-free, and capped.

In contrast, the UK system treats higher education more as an individual investment, with students taking on large loans with interest and repaying them over time. The argument is that graduates should contribute more because they benefit financially — but taxpayers already fund many services they may never use, such as state schools, the NHS, or the welfare system.

In that sense, Austria and Germany simply apply the same logic to higher education: the cost is shared across society upfront, rather than carried by the individual graduate later.