Punitive student loans threaten the future of UK science

Debate around the contentious plan 2 student loan system has garnered widespread attention over the last year: retrospective changes by successive governments have led to spiralling graduate debt and increasing cost-of-living pressures for the newest entrants into the workforce. A generation of students feels betrayed by the establishment and the hidden inequalities embedded into this flawed system are now becoming apparent.

Beneath the radar, the plan 2 loans’ predatory terms have quietly taken a disproportionate toll on the UK’s science graduates, with the most punitive features hitting this group hardest. More than 20% of the 50 loan holders Chemistry World surveyed (mostly chemistry graduates) in a self-selecting poll said they were considering cutting their losses: leaving the sector, moving abroad, or restricting their hours and responsibilities. This steady drain of talent from the UK scientific workforce is a worrying trend, and one that is only set to get worse as the next generation begins to make career choices, says Neil Walsh, pensions officer at the trade union Prospect. ‘There’s a complete undermining of science as a sector and where it gets really problematic is when that starts seeping through to secondary school students deciding where their career future lies.’

The longer you stay in education to increase expertise in your field and become ‘highly employable’, the more you are penalised financially in the loan.

Anonymous plan 2 load holder

So why is a country purportedly committed to becoming a science and technology superpower creating such an unattractive environment for graduates in these fields?

Tweaked beyond recognition

Plan 2 loans were introduced in 2012 as tuition fees reached £9000 a year. They were put in place by the coalition government as part of their austerity measures following the 2008 financial crash.

Under this system English and Welsh students were eligible to borrow from the government to cover tuition and living costs for each year of their course, totalling a maximum of around £22,000 per year. During the period of study, interest was linked to the retail price index (RPI), a widely discredited measure of inflation, plus another three percentage points. Students would not be required to begin repayments until after graduation and only after their salary was above a given threshold which would increase annually in line with average earnings. From this point, new graduates would then repay 9% of their income over this salary limit, with a variable interest rate (between RPI and RPI+3%) charged on the remaining balance of the loan. Any outstanding balance after 30 years would be written off.

‘When they were originally introduced, the assumption was that the student would pay roughly half and the state would pay roughly half, because the loan was written off at a certain point,’ says Alison Wolf, an economist at King’s College London and a member of the House of Lords. As such, it was never intended that the majority of graduates would pay off the loan: instead, the state would contribute towards the cost of higher education through loan write-offs rather than upfront teaching grants.

However, repeated changes to the original terms – notably three successive repayment threshold freezes – have shifted this balance substantially towards the individual, with Institute of Fiscal Studies (IFS) analysis suggesting students will ultimately bear 97% of the cost themselves. In 2016, when the first repayments became due, the threshold was set at £21,000 (40% more than a 40-hour/week minimum wage salary of £14,976). But freezes in 2016–18, 2021–25 and from 2027–30, in addition to switching to inflation rather than average wages as an index for increases, means that today’s threshold of £29,385 is substantially lower than the projected £33–35,000+ if the government had stuck to the original terms. This means the threshold is now only 11% above the current minimum wage of £26,437.

We will reach a stage one day when the minimum wage is the repayment threshold and you’ll be no better working in a supermarket than in a lab.

Anonymous plan 2 load holder

This dual fiscal drag pulls more people into repayment at an earlier stage while simultaneously increasing the rate at which the debt grows and the resulting financial pressure has already had a significant impact on this generation of graduates. Between spiralling debt, stagnating wages and ever increasing cost-of-living pressures, many report being unable to reach the conventional milestones of adult life – renting or buying a house, starting a family, or paying into savings or a pension. ‘It’s clearly not fair and not at all what the original policy was meant to deliver,’ says Wolf. ‘If you borrow for a mortgage, you don’t expect the terms to change after you’ve taken it out, but that’s effectively what they’ve done to this generation of students.’

Science’s ‘sour spot’

These issues affect all plan 2 loan holders, regardless of degree type or ultimate career. But digging deeper into the nuances of this system, it soon becomes apparent that the most significant financial penalty falls upon science graduates, particularly those who choose to remain in the sector.

‘They’re more likely to have a longer degree and do a postgraduate,’ explains Walsh. ‘And if they have pursued that further study, they may have taken out a parallel postgraduate loan,’ – repaid at an additional 6% of income over £21,000. Even without additional borrowing, several years of further study means the debt balloons, leading to a much larger balance when they first start earning.

It’s bad news for scientists when it comes to salaries too, adds Walsh. ‘The people who pay the greatest percentage of their lifetime earnings are not the lowest earning graduates, but they’re not the highest earning graduates either.’ High-paid city workers – investment bankers, magic circle lawyers and management consultants – will quickly earn enough to begin repaying the loan, ultimately clearing the balance before substantial interest accrues. Conversely, the lowest paid graduates rarely make significant repayments and ultimately the bulk of their borrowing is cleared after 30 years. The middle earners, which includes most science sector roles, occupy the sour spot, making substantial repayments which are consistently dwarfed by the added interest over the entire term of the loan.

If I had better knowledge of how the student loan system would affect me now and in the future, I would have likely became a carpenter rather than a materials scientist.

Anonymous plan 2 load holder

Freezing the repayment threshold, therefore, affects this group most acutely. According to the IFS’s student finance calculator, the latest changes will cost the middle 10% of earners roughly £22,000 more over their lifetime, compared with £6000 for the lowest 10% and just £3500 for the highest. This regressive repayment structure is one of several factors that could push science graduates away from scientific careers.

Few enter science in search of a highly paid career, but the widening disparity between the cost of a Stem degree and salaries in Stem careers is making the choice of employment sector a question of practicality rather than passion for a growing number of new graduates.. ‘Most people sell out,’ one anonymous loan holder told Chemistry World in the survey. ‘A career in Stem does not compete with consulting, finance and corporate law jobs. The toll of plan 2 definitely influenced many of my peers’ decisions to make this switch.’

‘As tuition fees increase, it is a real consideration for students whether or not the potential future earnings of a career will allow them to repay their loans,’ shared another, who works in a Stem pastoral role. ‘Many are choosing to go into finance or banking to increase their earning potential and pay off their student loans quicker.’

And even for those who did stay in science, the plan 2 system is raising uncomfortable questions about how their future in that sector will look in the face of these growing economic pressures. But even some of those who have accepted lower salaries for their dream career are beginning to question whether a future in the sector really makes economic sense. Average salaries in science sit around the boundary for higher rate income tax: £57,725 across all ages, and £43,577 for the 25–34 group. Marginal tax rates – the percentage of tax paid on the next pound earned – can therefore range from 37% to 57% for loan holders. ‘We have [union] members reporting a withdrawal rate (including pension contributions) of 64 pence in every pound,’ says Walsh. ‘It’s absolutely obscene and a complete and utter disincentive to working longer or pursuing more senior roles. The government should be much more concerned than it seems to be.’

This trend could spell serious problems for the sector further down the line, notes Stephen Hendry, inclusion and diversity programme manager at the Royal Society of Chemistry. ‘If financial pressures deter talented people from pursuing chemistry and other scientific disciplines, there’s a risk of narrowing both the talent pipeline and its diversity. This, in turn, limits diversity of thought, reduces the range of experiences and perspectives that drive innovation, and ultimately undermines the long-term resilience and competitiveness of the UK’s chemical sciences sector,’ he explains.

Hendry says that the issue may be a particular problem for the chemical sciences. ‘Unlike medicine or some branches of engineering – which can be perceived as offering a direct and clearly defined route into employment – chemistry careers can appear less certain to prospective students,’ he says. ‘The prospect of accumulating debt may carry greater weight when considering whether to choose a chemistry degree, even though evidence consistently shows that chemistry graduates enjoy strong employment outcomes.’ 

This problem will become particularly acute as recognition of these ‘science penalties’ percolates down into the following generation, steering their choice of degree towards other fields. ‘Secondary school students now have more foresight than plan 2 graduates did,’ says Walsh. ‘They’re aware that these loans are much more expensive now and that the government will unilaterally and unfairly change their terms and conditions. That’s going to be a huge disincentive to even consider a career in science.’

Rationale and reform

These successive policy changes would be at odds with the government’s stated aim of making the UK a science and technology superpower by 2030, but it’s unclear whether they even recognise the severe problems they are storing up. Part of the issue is that it’s too tempting for governments to target this small subset of the population every time there’s a bit of fiscal pressure, explains Walsh. An accounting sleight of hand means that any savings government can generate by altering loan repayments can be banked across all 30 years of the terms of the loan, Walsh notes.

As a country we shouldn’t be profiting off of education, especially in a sector that delivers huge financial growth and secures the health solutions of the future.

Anonymous plan 2 load holder

For example, the threshold freeze announced in 2025 banked the Treasury an extra £5.6 billion for the tax year 2026–27, better balancing the books without contravening other election pledges. As a result, the government is now projected to make a £679 million surplus on the final cohort (2022–23) of plan 2 loan holders, according to a recent Higher Education Policy Institute report.

Critics claim that the government is profiteering off a generation’s education. One of the most outspoken organisations pushing for reform is the campaign group Rethink Repayment, chaired by Ollie Gardner. ‘We have three main calls for policy change: one, interest should be capped at consumer price index inflation, not RPI+3%. Two, the repayment rate should be lowered from 9% to 5%. Three, the government should reverse the threshold freeze,’ he explains. ‘We’ve always focused on trying to be as pragmatic as possible so we’re working on pressuring the government to reverse the threshold freeze in the upcoming budget. That’s what’s going to help the most people right now.’

This change would offer the most relief for science graduates and Prospect are likewise lobbying the government to redress the repayment thresholds. These calls were echoed by the recent Treasury Committee report, Student loans: broken and unfair?, which stated that the government had a ‘moral obligation’ to reverse the freeze and ‘honour the terms and conditions under which those loans were sold to students’. However, the cabinet’s lukewarm response to this landmark report has left many campaigners fearing there is little prospect the issue will be addressed in this month’s budget.

But with even the government itself conceding that the system is broken and unfair, sooner or later the ruling party will have to address this snowballing student debt crisis. ‘Students pay far too high a share of the cost of their higher education and that needs to be rebalanced,’ says Walsh. ‘The next budget needs to reverse last year’s change or it will ultimately lead to people losing faith in the government’s ability to honour its words and make careers in science and technology so unattractive to young people.’