Young people didn’t fully understand terms of student loan plans, inquiry finds

More than half of students who took out loans to help pay for their degrees did not fully understand the terms and conditions of repayment, a parliamentary inquiry has found.

More than 52,000 people responded to the Treasury Committee’s call for evidence on experiences with student loans; this is one of the highest response rates ever recorded to a select committee inquiry.

The statement comes after campaigners highlighted that years of rising inflation had left students unable to make a change to their repayment plans, which are pegged to the retail price index (RPI) inflation rate plus up to three percentage points depending on how much you earn.

Of the 49,357 respondents who received student loans, 28,275 said they did not understand the terms and conditions of the plans in advance.

Alumni have previously told Independent They will never be able to pay off their student loans under the current system.

Pressure is mounting on the government to reform student loan repayments after Chancellor Rachel Reeves chose to freeze the student debt repayment threshold in the Budget in November.

The inquiry asked anyone over the age of 16 to contribute directly to their experiences and views of student debt via an online survey. Of the respondents who received a loan, 40,373 said the financial impact of repaying a student loan was worse than expected with the tax level, and 45,843 said they thought the interest level and repayment terms were unreasonable.

Responses also highlighted that young people feel their student loan debt is holding them back from important milestones; 34,555 people said their repayments had a significant impact on their future financial planning.

More than 25,000 respondents said they would not take out student loans if given the choice again. However, 45,066 people said they could not continue higher education.

Treasury Committee Chair Dame Meg Hillier said the responses showed the “enormous extent and strength of disappointment and sadness”.

“Let me say this very clearly to those who filled out our survey: the message has reached the committee,” he said in a statement. “While not everyone has had a bad experience, the sheer scale and power of disappointment and sadness is overwhelming and as MPs we must listen.

“It is imperative for the well-being of our country that people now in their 20s and 30s feel encouraged to work hard and build successful careers. Unfortunately, these findings tell us that too many young people are feeling overburdened and demoralized by student debt.”

“My committee will now spend the coming weeks looking at different options available to the government before making some recommendations for change.”

Ollie Gardner, founder of campaign group Rethink Repayment, said the results showed the student loans system “urgently needs reform”.

“The Treasury Committee’s survey sends a clear message to politicians: the punitive student loan system is holding young people back and needs urgent reform,” he said.

“We should all be deeply concerned that student loan repayments are having such a significant impact on young people’s finances, preventing many from reaching important life milestones such as buying a home, starting a family and saving for retirement, simply because they choose to pursue higher education.

“To avoid the long-term economic consequences of leaving an entire generation behind, Rethink Repayment is calling on politicians to reform the system. The ability of millions of young people to build a future in the UK depends on it.”

A Department for Education spokesman said he acknowledged graduates had “concerns” about loan repayments but insisted the system “protects low-income graduates”.

“We have taken over the current system and taken steps to make it fairer, including raising the repayment threshold for the first time since 2021 and capping maximum interest rates this year to protect graduates from rising costs,” they said.

“We have also reintroduced targeted care grants to expand opportunities for people from all backgrounds to go to university or college.

“The student finance system protects low-income graduates with income-contingent repayments and the write-off of outstanding balances and interest at the end of repayment terms.”