Committee urges reversal of repayment threshold freeze
A Treasury select committee investigation has concluded that government promotional materials for student loans in England and Wales “amounted to mis-selling,” pointing to comparisons to mobile phone contracts and a failure to disclose that terms could change retroactively.
The report, published Tuesday, said successive governments had “taken the politically convenient option of loading burdens on to younger generations, hoping that they will not notice until future years.” It applies to plan 2 loans held by students from England who started university between September 2012 and July 2023, and students from Wales who started between September 2012 and the present day.
The committee highlighted three instances it said constituted the mis-selling: YouTube videos and slides that did not disclose the government could vary loan terms and conditions retroactively; promotional material suggesting monthly repayments were comparable to a mobile phone contract, which the report said was inaccurate for higher earners; and the Student Loans Company’s failure to make clear enough in the application process that the government could retroactively change terms.
MSI previously reported that the Treasury Select Committee began an inquiry into England’s student loan system on June 2, as the British Social Attitudes survey found 34% of people in 2025 believed a university degree was not worth the time and money — up from 14% in 2005.
The committee survey of borrower experiences received more than 52,000 responses. More than half said they had not understood the terms and conditions before taking out their loan. One respondent called the repayments “a tax on ambition.”
Chair Meg Hillier said it was uncommon for the committee to agree that a specific budget measure must be reversed.
“Our report is a signal to the Treasury and the Department for Education that this can no longer be ignored,” she said. “Patience has run out.”
She described reversing the threshold freeze as “a modest change that would not eat up vast resources” and said it “would go a long way to repairing the damage done to the trust between graduates and those responsible for overseeing the student loans system.”
Reeves, the chancellor, caused a furore last year when she announced the repayment threshold on plan 2 loans would be frozen at £29,385 for three years from April 2027. Above that salary level, graduates must repay 9% of anything they earn. The freeze means pay increases are not protected from the rising cost of living.
When plan 2 loans were first announced in 2010, the government of the time said the £21,000 earnings threshold would be uprated annually in line with earnings from 2016. It was then frozen from 2016 to 2018 and again from 2021 to 2025.
In April the government announced a cap on loan interest rates of 6%, but has so far resisted calls to unfreeze the repayment threshold.
A government spokesperson said the report was an “important contribution to the debate on improving the student finance system, and lays bare the confused, and broken system inherited.” They said ministers were looking for ways to make the system fairer in a financially sustainable way and would respond to the committee in due course.
“It is vital students are given clear and accurate information so they can make informed decisions about their future and we are working closely with the Student Loans Company on communications to students,” the spokesperson said.