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A group of MPs has criticized the government for likening student loan repayments to phone contracts or cinema tickets, describing this comparison as “mis-selling.” Their new report highlights concerns about how students were inadequately informed that loan terms could be altered retrospectively and urges the government to reconsider its decision to freeze the income threshold for some graduates’ loan repayments.
Chancellor Rachel Reeves announced last year that the repayment threshold for students with Plan 2 loans would remain fixed at £29,385 from 2027 to 2030, rather than increasing in line with inflation. This freeze means graduates may start repaying their loans earlier or pay more as their earnings rise, even though the threshold stays constant. The government and the Student Loans Company acknowledged the Treasury Committee’s report as a valuable contribution to ongoing discussions about student finance.
Plan 2 loans are those taken by students in England between September 2012 and July 2023 and are still available to Welsh students. Graduates repay 9% of their income above the threshold automatically. The committee’s report also drew attention to a BBC investigation revealing that, a decade ago, the government had compared student loan repayments to £30-a-month phone contracts in presentations aimed at teenagers—an analogy deemed inaccurate for higher earners, and therefore considered “mis-selling.” Although student loan policies are exempt from consumer protection laws, the committee emphasized the expectation for the government to act with fairness and decency.
Voicing the need for reform, Oliver Gardner, founder of the campaign group Rethink Repayment, stated, “The student loan system is unfair, unsustainable and in urgent need of reform.” Meanwhile, Lewis Wilson from the National Union of Students suggested that a future Labour government might implement immediate measures such as raising the repayment threshold and lowering the repayment rate, while acknowledging deeper reforms are necessary. Personal experiences from borrowers also underscore struggles with the current system. For instance, Laura-May Nardella recounted hearing her loan repayments compared to mobile phone bills as a teenager, only to find that her actual payments, which will reach over £3,000 in 2025, feel “like three brand new phones” rather than simple monthly bills.
Despite repaying her loans, Nardella, who works in HR and is a Cambridge graduate, has seen her overall debt increase due to interest accumulating at a rate of 6.2%, reflecting the challenges faced by higher earners. She described the psychological difficulty of feeling like the debt isn’t decreasing, stating, “It’s not how it was sold to us at the time.” While she and her husband have been able to purchase a home, the lingering student debt remains a significant burden, detracting from financial goals such as retirement planning and family life.
The MPs’ inquiry was launched amid widespread dissatisfaction about the terms of student loan repayment. Thousands of respondents to the inquiry expressed that they had not fully understood the loan conditions prior to borrowing. Dame Meg Hillier, chairwoman of the Treasury Committee, remarked on the strong feelings of frustration and upset the inquiry exposed. Since 2023, Plan 2 loans have been replaced in England by Plan 5 loans, which start repayments at a lower salary threshold (£25,000) and include a longer forgiveness period, with loans written off after 40 years instead of 30. However, the committee pointed out that this change shifts more of the financial burden onto all borrowers rather than just the highest earners.
Among current students, 20-year-old architecture student Emma Cook shared her worries about repaying 9% of her income above the threshold for four decades, describing the prospect as “depressing.” Approaching the end of her undergraduate studies at the University of Greenwich and carrying a £50,000 student debt, she is anxious about securing paid employment quickly to prevent excessive interest accumulation on her loan. Cook emphasized that the difficulty in finding graduate-level jobs adds to the pressure, saying, “Sure, everyone wants a graduate, right? But no one wants to hire one.” She also expressed a desire for expanded apprenticeship options and employment opportunities for young people to alleviate the challenges associated with student loan debt
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