The Treasury Select Committee has released a scathing report accusing successive governments of a 'politically convenient' but fundamentally unjust stealth freeze on student loan repayments. The freeze has silently drained the pockets of millions of graduates, with MPs from all parties condemning the tactic.
Threshold Freeze History
At the centre of the row is the threshold at which Plan 2 graduates begin repaying their loans. When the scheme was introduced, the figure was set at £21,000, with a pledge in 2010 that it would increase annually in line with wages from 2016 onwards. Instead, it has been frozen three times by both the Conservatives and Labour: from 2016 to 2018, again from 2021 to 2025, and now, following last year's Budget, for a further three years from April 2027, locking in the higher figure of £29,385.
Hidden Tax Rise
Campaigners argue the effect is a hidden tax rise disguised as a technicality, dragging increasing numbers of low and middle earners into higher repayments they were never led to expect. The cross-party committee uncovered evidence amounting to mis-selling by officialdom, though the government has ensured it cannot be taken to court.
Misleading Information
Investigators highlighted government-produced YouTube videos and presentations that failed to warn borrowers that ministers could alter loan terms whenever it suited the Treasury. They also criticised marketing materials that likened monthly payments to a mobile phone contract or cinema outing – a comparison deemed misleading for higher earners. The Student Loans Company faced accusations of concealing vital small print – that rules can be changed retrospectively – deep within guidance documents, rather than highlighting it prominently as any mainstream lender would be required to do.
Political Response
Dame Meg Hillier, who chairs the committee, said MPs across the political spectrum have finally lost patience. She revealed that ministers privately acknowledge the system is broken but maintain fixing it isn't a priority, noting that reversing the threshold freeze wouldn't drain significant Treasury resources. The report also disclosed that today's students could bear as much as 95 per cent of the cost of their own university education, with taxpayers covering just 5 per cent.
Calls for Reform
MPs are calling for a reversal towards a much fairer 50:50 split between graduates and the state over the long term. They are also pushing for interest on loans to be tied to the lower CPI measure of inflation rather than the harsher RPI. The conclusions were informed by an extraordinary public response, with more than 52,000 people completing an online survey – one of the largest turnouts for any select committee investigation in history.
Tom Allingham, a student finance expert at Save the Student, described the report as vindication for years of campaigning, branding the threshold freeze 'immoral' and a betrayal of an entire generation of graduates. He pressed the Treasury to take additional action, arguing the u-turn should represent just the first step in a comprehensive reform of the student finance system.
