Plan 2 loans taken between 2012 and 2023 affect about 5.8 million borrowers, with current England and Wales tuition fees capped at £9,535 this academic year.

Public reaction is mixed: supporters say the cap protects borrowers from spiraling debt, while critics say it mainly benefits higher earners and that thresholds and systemic reforms are still needed.

Skills Minister Jacqui Smith says the government is fixing the “broken Plan 2 system” and pursuing broader student-finance reforms to make the system fairer for students, graduates, and taxpayers.

Chancellor Rachel Reeves has faced pressure to reform Plan 2 following her budget, which froze the salary threshold at £29,385 for three years, and the move aligns with broader reforms such as restoring maintenance grants and rethinking the Plan 2 framework.

As of late April, about 5.7 million graduates still owe debt, and roughly 80% of the total Plan 2 balance is held by Plan 2 borrowers in 2024-25, highlighting the scale of the burden.

The government will cap interest on Plan 2 undergraduate loans and Plan 3 postgrad loans at 6% starting in September, tying it to the RPI with a ceiling of 6% to address soaring debt and repayment costs.

Campaigners and student representatives greeted the cap as a step forward but pressed for broader reforms, including a higher repayment threshold and changes to repayment terms.

The announcement was reported as breaking news, attributed to a government decision and covered with references from major outlets.

The plan aims to prevent debt growth by limiting how high interest can rise on Plan 2 and Plan 3 loans, without changing the required repayment percentage.

The 6% cap applies across study and post-graduation periods and will be reassessed annually based on the year-end RPI figures.

Officials frame the cap as temporary protection against inflation spikes from global events and the Iran-related conflict, intended to shield borrowers from rising debt costs during economic volatility.

The cap is presented as a response to inflation pressures and distant-conflict effects, with immediate protection for borrowers highlighted by the government.