The Treasury Committee has accused the government of "mis-selling" student loan comparisons that left students unaware of the potential financial implications. A decade-old comparison of student loan repayments to a £30-a-month phone contract is now being labelled as inaccurate and misleading, particularly for higher earners.
The committee's report argues that promotional materials from 2012-2023 failed to inform students that the terms of their loans could be altered retrospectively. This lack of transparency led graduates to believe they were signing up for a fair deal, when in fact changes such as last year's income threshold freeze would have significant consequences.
The decision to keep the Plan 2 loan repayment threshold at £29,385 between 2027 and 2030 has been slammed by critics. This means that graduates will either start repaying their loans sooner or pay more as their salaries rise with inflation, while the threshold remains static.
Plan 2 loans, which are still offered in Wales, automatically deduct 9% of earnings above £29,385. The retrospective nature of changes has left borrowers feeling "widespread dissatisfaction", with thousands expressing a lack of understanding about their loan terms during the committee's inquiry.
Campaign groups and student representatives have welcomed the report, describing it as a long-overdue recognition that the student loan system is unfair and unsustainable. Oliver Gardner, founder of Rethink Repayment, said the inquiry confirmed "what we have known for years" – that the system needs fundamental reform.
The government and Student Loans Company have acknowledged the report's findings, but only in vague terms. A spokesperson claimed ministers are already taking decisive action to make the system fairer, while the Student Loans Company reaffirmed its commitment to providing accurate information to students.