The government compared student loan repayments to a £30-a-month phone contract in promotional presentations to teenagers a decade ago – a comparison that MPs have now said “amounted to mis-selling”.
In a scathing report published on Tuesday, the Treasury Committee found that students were not told clearly enough that loan terms could be changed retrospectively, and called for a U-turn on Chancellor Rachel Reeves’ decision to freeze the repayment threshold for Plan 2 loans.
“MPs say government mis-sold student loans by comparing repayments to phone contracts and failing to disclose term changes.”
Plan 2 loans were taken out by students in England between September 2012 and July 2023, and are still issued in Wales. Graduates automatically pay back 9% of everything they earn above the threshold. Reeves froze that threshold at £29,385 for three years from April 2027, meaning graduates start repaying sooner or pay more as their salaries rise with inflation.
The committee highlighted three instances it said amounted to mis-selling: YouTube videos and slides that did not disclose the government could vary loan terms retrospectively; promotional material suggesting monthly repayments were comparable to a phone contract or cinema ticket, which was inaccurate for higher earners; and the Student Loans Company’s failure to make it clear in the application process that terms could be changed.
“Patience has run out,” said Dame Meg Hillier, chair of the Treasury Committee. “Ministers openly accept that the system is broken and unfair but have said that it is not a priority to fix it.”
Oliver Gardner, founder of campaign group Rethink Repayment, said the inquiry had concluded “what we have known for years”. “The student loan system is unfair, unsustainable and in urgent need of reform,” he said.
Laura-May Nardella, now 31, recalled being told her future loan repayments would be like a mobile phone contract. “If I look at my 2025 repayments, I’ve paid over £3,000,” she said.
The committee’s survey received more than 52,000 responses, with over half saying they had not understood the terms before taking out the loan. Lewis Wilson, from the National Union of Students, said the next Labour administration could bring in “immediate fixes” by raising the repayment threshold and lowering the repayment rate, but the system needed “fundamental reform”.
A government spokesperson said ministers were “already taking decisive action” and would “continue to look for ways to make the system fairer for students, graduates and taxpayers in a financially sustainable way”. The Student Loans Company said it “recognise[s] the importance of ensuring that students and borrowers… have access to clear, accurate and timely information”.
The committee said the government had a moral obligation to reverse the threshold freeze – a move that would cost £355m by 2029-30. Despite the damning report, ministers have yet to commit to a change.
