Key takeaways
- MPs say student loan comparisons misled prospective students about repayment costs.
- Committee urges government to reverse the Plan 2 repayment threshold freeze.
- Borrowers report rising debt, high repayments and poor understanding of loan terms.
A U.K. parliamentary committee has criticized government student loan comparisons to phone contracts and cinema tickets, saying they amounted to mis-selling. The committee is calling for major reforms to repayment rules and stronger disclosure of loan terms after finding that many borrowers were not fully informed.
Treasury committee calls for student loan reforms
A report released Tuesday by the U.K. Treasury Committee criticized how student loans were presented to prospective university students, saying government student loan comparisons to monthly phone contracts and cinema tickets gave a misleading picture of repayment costs for many graduates.
The committee also said borrowers were not clearly told that loan terms could be changed after they signed up. It urged the government to reverse its decision to freeze the repayment threshold for Plan 2 student loans between 2027 and 2030.
Under the current policy announced by Chancellor Rachel Reeves, graduates with Plan 2 loans will continue repaying once they earn more than 29,385 pounds. Because the threshold remains frozen while wages rise, many borrowers will repay more over time.
“The government should comply with not only the law, but basic fairness and common decency,” the committee said in its report.
Borrowers describe financial and emotional impact
The committee cited evidence from borrowers who said they did not fully understand how student loans worked before enrolling at university, noting that misleading student loan comparisons contributed to this lack of awareness.
Laura-May Nardella, 31, said she remembered officials comparing future repayments to the cost of a mobile phone contract while she was still in school. She now pays more than 3,000 pounds a year toward her student loan.
“That isn’t a phone bill. That’s three brand new phones,” she said.
Nardella said her outstanding balance has continued to grow because of interest charges despite years of repayments. She said the debt affects long-term financial planning, including saving for retirement and starting a family.
Oliver Gardner, founder of campaign group Rethink Repayment, said the inquiry confirmed long-standing concerns.
“The student loan system is unfair, unsustainable and in urgent need of reform,” Gardner said.
Lewis Wilson of the National Union of Students said the government could immediately improve the system by increasing the repayment threshold and reducing repayment rates while pursuing broader reforms.
Government defends current system
The Student Loans Company said it welcomed the committee’s contribution to the debate and recognized the importance of providing students with clear, accurate, and timely information about student finance, particularly in light of concerns raised over misleading student loan comparisons.
A government spokesperson said ministers were already taking action and would continue looking for ways to make the system fairer for students, graduates and taxpayers while keeping it financially sustainable.
The committee launched its inquiry after receiving thousands of responses from borrowers who said they had not fully understood the terms of their loans.
Plan 2 loans were issued to students in England from 2012 through mid-2023 and remain available in Wales. They require graduates to repay 9% of earnings above the income threshold. New undergraduate borrowers in England now receive Plan 5 loans, which begin repayments at a lower salary threshold and remain repayable for up to 40 years instead of 30.
Architecture student Emma Cook, who has about 50,000 pounds in student debt, said concerns about accumulating interest have increased pressure to find work after graduation.
“If I don’t get a job, I can’t pay back the student loan,” Cook said. “So the sooner I get a job, the better.”