The Treasury Select Committee has accused successive governments of a 'politically convenient' tactic that quietly loads debt onto young graduates by freezing the student loan repayment threshold. In a damning report, MPs from all parties say ministers have a 'moral obligation' to scrap the freeze, which they brand fundamentally unfair.
Three Freezes Since 2016
At the heart of the row is the threshold at which Plan 2 graduates begin repaying their loans. When the scheme launched, ministers set the figure at £21,000 and promised in 2010 that it would rise annually with wages from 2016 onwards. Instead, it has been frozen three times: from 2016 to 2018, from 2021 to 2025, and now, following last year's Budget, for a further three years from April 2027, locking in the much higher figure of £29,385.
Campaigners say the effect 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.
Mis-Selling by Officialdom
The cross-party committee found evidence of what amounts to mis-selling by officialdom, though the government has ensured it cannot be sued. Investigators highlighted government-produced YouTube videos and slideshows that failed to warn borrowers that ministers could tear up loan terms whenever it suited the Treasury. They also criticised glossy promotional material that compared monthly repayments to a mobile phone contract or a trip to the cinema, calling it misleading for higher earners.
The Student Loans Company was accused of burying crucial small print—that rules can be changed retrospectively—deep in guidance, rather than flagging it prominently as any high street lender would be forced to do.
System 'Broken' but Fixing Not a Priority
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 Treasury resources.
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 only 5 per cent. MPs want that flipped towards a much fairer 50:50 split between graduates and the state over the long term. They are separately demanding that interest on loans be pegged to the lower CPI measure of inflation rather than the more punishing RPI.
Extraordinary Public Response
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.
