The UK government announced plans to improve guidance for students taking out loans in England after facing criticism over how loan terms were presented to borrowers. The new guidance will explicitly warn students that terms and conditions may change, providing clearer information about what borrowers are agreeing to when they sign up.
The announcement follows a July report from MPs on the Treasury committee that concluded the government had engaged in mis-selling practices. The committee cited promotional materials including slideshows comparing loan repayments to mobile phone contracts and YouTube videos that failed to mention the possibility of condition changes. The investigation was prompted by widespread concern after the then chancellor announced in November that the repayment threshold on plan 2 loans would be frozen at £29,385 for three years beginning in April 2027, contrary to expectations that thresholds would rise with inflation annually.
The Treasury committee determined that the government held a moral obligation to reverse the freeze and maintain student trust based on the original terms under which loans were sold. In its formal response published on Sunday, the government acknowledged the difficulties graduates face with loan repayments and stated it keeps all aspects of the student finance system under review. However, it did not commit to reversing the threshold freeze.
The government rejected the committee’s recommendation to issue new loans on a contractual basis that would prevent future term modifications, arguing it must retain flexibility to adapt the system to economic changes and maintain stable taxpayer contributions. In August, cross-party lawmakers signed a letter urging the new chancellor to review the repayment system, citing historically high effective marginal tax rates faced by middle-income graduates when combining income tax, national insurance, and loan repayments.
Treasury committee chair Meg Hillier welcomed the commitment to improved guidance but emphasized that clearer information would not assist existing graduates already facing punitive repayment terms. She called on the chancellor to reconsider the threshold freeze in the upcoming budget. A government spokesperson highlighted additional measures including increased maintenance loans and reintroduced targeted maintenance grants, while committing to continued efforts toward a fairer and financially sustainable student finance system.
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