Treasury Committee Faults Student-Loan Communications and Calls for Shared University Funding

The Treasury Select Committee published findings Tuesday accusing the Department for Education of misleading more than 5.8 million borrowers about the costs and terms of Plan 2 student loans. GB News reported that the committee described official communications as deeply problematic and concluded that several amounted to mis-selling.

The inquiry identified three ways the department and the Student Loans Company misled prospective borrowers.

Explanatory YouTube videos and promotional material aimed at teenagers compared monthly repayments to the cost of a £14 mobile phone contract or a £10 night out. Other examples likened repayments to broadband subscriptions, cinema trips and drinking at home. Graduates on higher salaries can face monthly repayments worth hundreds of pounds.

Some borrowers said their student debt had prevented them from securing a mortgage. Students were not properly informed that the government could change loan terms and conditions after signing up, including altering the earnings threshold at which repayments begin. Around 5.8 million students took out Plan 2 loans between 2012 and 2023.

The outstanding balance reached £213 billion as of March last year. Borrowers begin repaying once they earn £29,385 a year, with any remaining balance written off after 30 years. Interest starts accumulating while students are still studying and is linked to the Retail Price Index.

Graduates earning more than £52,885 pay RPI plus an additional three percentage points. The Treasury confirmed interest rates will be capped at six per cent from September. When the loans were introduced in 2010, students were told the repayment threshold would increase each year in line with average earnings from 2016.