A cross-party committee of Members of Parliament has urged the government to reverse its planned freeze on the student loan repayment threshold, citing a moral obligation to uphold commitments made to graduates. The Treasury Select Committee criticized proposals to extend the freeze from 2027 for an additional three years, arguing that successive governments have steadily increased the financial burden on borrowers.
The current system, known as Plan 2 loans, was introduced in 2010 with an initial repayment threshold of £21,000. Ministers at the time pledged the threshold would rise annually in line with average earnings starting in 2016. However, this increment was halted between 2016 and 2018 and again from 2021 to 2025, with last year’s budget confirming a further freeze until 2030. The committee warned that freezing the repayment threshold effectively forces graduates to begin repayments sooner and pay more each month. According to analysis by the Institute for Fiscal Studies, if the threshold had continued to rise with earnings, it would now exceed £31,200.
The Treasury committee launched its inquiry in March following a public campaign and received over 52,000 responses from graduates. The investigation pinpointed concerns over transparency and alleged mis-selling by the Department for Education (DfE) and the Student Loans Company (SLC). MPs faulted official information materials—such as YouTube videos and presentations—for failing to adequately communicate that loan terms could be changed retrospectively. Furthermore, comparisons to everyday expenses like mobile phone contracts or cinema tickets were deemed misleading, particularly for higher earners whose repayments are significantly larger.
A key issue highlighted in the report relates to the unclear legal status of student loans. While ministers describe them as “loan contracts,” the SLC asserts the loans are statutory, limiting borrowers’ protections. The committee recommended that future loans be issued as formal contracts to prevent retrospective alterations.
Interest rates on student loans also attracted criticism. Because interest is calculated based on the retail price index (RPI) plus up to three percentage points, the freeze on thresholds leads to a higher proportion of income being subject to interest. MPs called for interest to be linked instead to the consumer price index (CPI), describing RPI as a discredited inflation measure.
The inquiry heard evidence suggesting that students commencing university now could be expected to cover up to 95% of their education costs, leaving taxpayers responsible for only about 5%. The committee expressed a long-term goal of achieving a more balanced 50-50 cost split between graduates and the state.
Dame Meg Hillier, chair of the Treasury committee, said the Department for Education “could no longer ignore the issue” and characterised the response to date as insufficient. She indicated that reversing the repayment threshold freeze would be a relatively modest adjustment but one capable of restoring trust among graduates.
Oliver Gardner, founder of the Rethink Repayment campaign group, welcomed the report’s recommendations and suggested they could form a starting point for political leaders such as Andy Burnham to support younger generations.
Requests for comment from the Department for Education, the Treasury, and the Student Loans Company were not immediately returned.