Ministers have a “moral obligation” to scrap a stealth freeze on student loan repayments that is quietly picking the pockets of millions of graduates, say MPs.
In a damning report, the Treasury Select Committee accused successive governments of loading debt on to the young in the hope they would not notice. The MPs from all parties branded the tactic “politically convenient” but fundamentally unfair. At the heart of the row is the threshold at which Plan 2 graduates begin repaying their loans.
When the scheme was launched, ministers set the figure at £21,000 and promised in 2010 that it would rise each year in line with wages from 2016 onwards. Instead, it has been frozen not once but three times by the Conservatives and Labour.
It was first frozen from 2016 to 2018, again from 2021 to 2025, and now, following last year’s Budget, for a further three years from April 2027, this time locking in the much higher figure of £29,385.
The effect, campaigners say, is a hidden tax rise dressed up as a technicality, dragging ever more low and middle earners into higher repayments they were never told to expect.
Astonishingly, the cross-party committee found evidence of what amounts to mis-selling by officialdom – even though the Government has cleverly ensured it can never be sued over it.
Investigators highlighted government-produced YouTube videos and slideshows that failed to warn borrowers ministers could tear up the terms of their loans whenever it suited the Treasury.
They also took aim at glossy promotional material that compared monthly repayments to the price of a mobile phone contract or a trip to the cinema – a comparison branded misleading for higher earners.
Meanwhile, the Student Loans Company was accused of burying the crucial small print – that the rules can be changed retrospectively – deep in guidance, rather than flagging it prominently as any high street lender would be forced to do.
Dame Meg Hillier, chair of the committee, said patience among MPs of all stripes had finally run out. She said ministers privately concede the system is broken but insist fixing it is not a priority, adding that reversing the threshold freeze alone would not eat up vast resources for the Treasury.
The report also revealed that today’s students could end up shouldering as much as 95 per cent of the cost of their own university education, with taxpayers picking up a mere 5 per cent.
MPs want that flipped towards a much fairer 50:50 split between graduates and the state over the long term – and are separately demanding that interest on loans be pegged to the lower CPI measure of inflation rather than the more punishing RPI.
The findings were shaped by an extraordinary public response, with more than 52,000 people filling in an online survey for the inquiry – one of the biggest turnouts for any select committee probe in history.
Tom Allingham, a student finance expert at Save the Student, said the report vindicated years of campaigning, calling the threshold freeze immoral and a betrayal of a generation of graduates. He urged the Treasury to go further still, insisting the u-turn should be merely the opening move in a full-scale overhaul of the student finance system.