Student loan promotion in England and Wales amounted to mis-selling, MPs say

A cross-party committee of MPs has concluded that the promotion of student loans in England and Wales amounted to mis-selling, citing promotional materials that compared repayments to mobile phone contracts and failed to disclose that the government could retrospectively alter loan terms. The Treasury select committee's report, published Tuesday, directly criticises the government's marketing of plan 2 student loans, which were taken out by students in England who started university between September 2012 and July 2023, and by students in Wales from September 2012 to the present day [1]. The committee highlighted YouTube videos and slideshows that did not make clear the government's power to vary the terms and conditions of the loans retrospectively [1]. The report's publication follows a decision by Chancellor Rachel Reeves to freeze the repayment threshold for these loans at £29,385 for three years from April 2027 [1]. Above this salary, graduates must repay 9% of their earnings, a freeze the committee said breaks the original terms under which the loans were sold [1]. When the plan was first announced in 2010, the government stated the £21,000 earnings threshold would be uprated annually in line with earnings from 2016, but it has been subject to repeated freezes since [1]. The Student Loans Company (SLC), the executive non-departmental public body owned by the UK Government, the Scottish Government, the Welsh Government and the Northern Ireland Executive, is responsible for both providing and collecting these loans alongside HM Revenue and Customs [4]. The committee found the SLC had not made it sufficiently clear during the application process that the government could change the terms and conditions retrospectively [1]. The committee's survey of experiences received more than 52,000 responses, with over half of respondents stating they had not understood the terms and conditions before taking out their loan [1]. Committee chair Meg Hillier said the report was a direct signal to the Treasury and the Department for Education. "Patience has run out," she said [1]. She added that reversing the threshold freeze would be "a modest change that would not eat up vast resources" and would help repair "the damage done to the trust between graduates and those responsible for overseeing the student loans system" [1]. Student loans in the UK, first introduced in 1990, are income-contingent, meaning repayment amounts vary with the borrower's income, and are written off after a set period [6]. The system has seen repeated reforms since tuition fees were greatly increased in 2012 amid public opposition, leading to a stratified system with five different loan "plans" currently available, which vary significantly in cost, terms, and structure [6]. A government spokesperson said the report was an "important contribution to the debate on improving the student finance system, and lays bare the confused, and broken system inherited" [1]. The spokesperson added that ministers are working closely with the SLC on communications to students to ensure they receive "clear and accurate information" [1].