The Treasury Select Committee has declared that ministers have a "moral obligation" to end the stealth freeze on student loan repayments, which is quietly draining the finances of millions of graduates. In a scathing report, cross-party MPs accused successive governments of heaping debt onto young people in the expectation they would not realise, labelling the approach "politically convenient" but fundamentally unjust.
Threshold Freeze History
At the centre of the controversy is the threshold at which Plan 2 graduates start repaying their loans. When the scheme was introduced, ministers set the figure at £21,000 and pledged in 2010 that it would increase annually in line with earnings from 2016 onwards. Instead, it has been frozen three times by both Conservative and Labour governments. It was initially frozen from 2016 to 2018, then again from 2021 to 2025, and now, following last year's Budget, for an additional three years from April 2027, this time at the higher figure of £29,385.
Campaigners argue the impact is a concealed tax increase disguised as a technicality, pulling increasing numbers of low and middle earners into higher repayments they were never informed to anticipate. The committee found evidence of what effectively constitutes mis-selling by officialdom, despite the government ensuring it can never face legal action.
Misleading Information
Investigators highlighted government-produced YouTube videos and slideshows that neglected to inform borrowers that ministers could abandon the terms of their loans whenever it benefited the Treasury. Critics also took aim at glossy promotional materials that likened monthly repayments to the cost of a mobile phone contract or a trip to the cinema, a comparison deemed misleading for higher earners. The Student Loans Company was further accused of burying vital small print — that the rules can be altered retrospectively — deep within guidance documents, rather than highlighting it prominently as any high street lender would be legally required to do.
Committee Chair's Statement
Dame Meg Hillier, chair of the committee, said patience among MPs across all parties had finally worn thin. She stated that "ministers privately acknowledge the system is broken, yet insist that fixing it is not a priority," adding that reversing the threshold freeze alone would not place significant demands on Treasury resources. The report also disclosed that today's students could ultimately bear as much as 95 per cent of the cost of their own university education, with taxpayers contributing a mere 5 per cent.
Proposed Reforms
MPs are calling for that balance to shift towards a considerably fairer 50:50 split between graduates and the state over the longer term, and are separately demanding that interest on loans be tied to the lower CPI measure of inflation, rather than the more punishing RPI. The findings were informed by a remarkable public response, with more than 52,000 people completing an online survey for the inquiry — one of the largest turnouts ever recorded for a select committee investigation.
Tom Allingham, a student finance expert at Save the Student, said the report vindicated years of campaigning, describing the threshold freeze as "immoral and a betrayal of an entire generation of graduates." He pressed the Treasury to go even further, arguing that the u-turn should serve as nothing more than the first step towards a comprehensive overhaul of the student finance system.
