In a significant shift in the conversation surrounding student loans, Nick Hillman, a key architect of the current system, has voiced concerns about the interest rates imposed on graduates. His remarks come amid intensifying debates on the financial burden faced by students and graduates in the UK. Hillman advocates for a recalibration of interest rates from the Retail Price Index (RPI) to the Consumer Price Index (CPI), a move he argues would ease the financial strain on many borrowers.
A System Born of Urgency
Hillman, who served as a special adviser to former universities minister Lord Willetts during the controversial tripling of tuition fees under the “Plan 2 Loans,” reflected on the hurried establishment of the student loans policy in 2010. At that time, the UK government was under immense pressure to make cuts to public spending, leading to significant changes in higher education funding.
“We were in a situation where every major political party had promised to protect certain areas of public spending,” Hillman shared. “Higher education was among the sectors facing drastic cuts, and the policy was created in what could only be described as a mad rush.” His candid admission sheds light on the historical context that shaped today’s student loan crisis.
The Case for Reform
Currently, graduates who entered university between 2012 and 2023 are subjected to interest rates calculated at RPI plus up to 3%. This approach raises concerns, especially given the Office for National Statistics’ 2013 declaration that RPI was “no longer fit for purpose.” Hillman argues that switching to CPI, the standard measure for inflation used in government policy, would be more equitable.
“Since we designed the system, RPI has been deemed a poor measure for gauging inflation,” he stated during an interview on Times Radio. “Adjusting the interest rate to CPI makes logical sense and aligns with current economic standards.” His call for reform is gaining traction, as discussions are reportedly underway in Downing Street regarding potential changes to the student loan framework.
Recent Developments and Protests
The urgency for reform is further highlighted by recent government decisions. In November 2025, Chancellor Rachel Reeves announced a freeze on the repayment threshold for Plan 2 loans at £29,385 for three years starting in April 2027. This freeze means that graduates will find themselves repaying their loans sooner than anticipated, as the threshold will not rise in line with inflation.
“We believe this approach is fair and reasonable,” Reeves defended the system in January, though many graduates and advocates for educational reform disagree. Last week, a group of graduates staged a striking protest outside Parliament dressed as sharks, accusing the government of predatory practices akin to “loan sharks.” Their actions underscore the growing discontent among borrowers who feel trapped by their financial obligations.
Implications for Graduates and Future Policies
As discussions unfold, the government faces mounting pressure to reconsider the structure of student loans. With the current repayment conditions and interest rates under scrutiny, the potential for reform could significantly impact the financial wellbeing of millions of graduates.
As Hillman’s insights resonate within the political arena, the future of the student loan system hangs in the balance. The conversation surrounding these loans is not merely academic; it affects the lives of countless individuals striving for a better future.
Why it Matters
The issue of student loan interest rates is not just a financial concern; it speaks to broader societal values regarding education accessibility and affordability. As more graduates find themselves ensnared in debt, the call for reform becomes a rallying point for those advocating for a fairer system. Ensuring that education remains a viable pathway to success, rather than a financial burden, is crucial for the future of the UK’s workforce and economy. The ongoing discussions may well shape the landscape of higher education in the UK for years to come, making it essential for policymakers to listen to the voices of those most affected.
