A parliamentary report released this week concluded that the government engaged in mis-selling practices when promoting student loans to applicants in England and Wales. The Treasury select committee identified three categories of problematic promotional materials, including YouTube videos and slideshows that failed to disclose the government’s ability to alter loan terms retroactively. Marketing materials that compared monthly repayment costs to mobile phone contracts were also cited as inaccurate for higher-earning graduates.
The controversy centers on a decision announced last year by Chancellor Rachel Reeves to freeze the plan 2 repayment threshold at £29,385 for three years beginning April 2027. Above this income level, graduates repay 9% of earnings, and the freeze prevents salary increases from offsetting living cost increases. The threshold was originally promised to adjust annually with earnings starting in 2016, but has been frozen multiple times since then.
Students who began university between September 2012 and July 2023 in England, and between September 2012 through the present in Wales, took out plan 2 loans under these terms. A committee survey drew over 52,000 responses, with more than half of respondents stating they did not understand the loan conditions when they borrowed. News reports have documented cases of borrowers owing tens of thousands of pounds whose debt increases monthly despite making repayments, due to high interest rates.
The committee emphasized that governments had historically placed financial burdens on younger generations without adequate public consideration. Committee chair Meg Hillier described the report as a signal that the issue cannot be ignored and characterized unfreezing the threshold as a modest change that would repair trust in the student finance system. The government responded by calling the report an important contribution to the debate and stating it is reviewing ways to make the system fairer, though it has previously resisted unfreezing the threshold despite implementing a 6% cap on loan interest rates in April.
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