Phone contract comparisons ‘amounted to mis-selling’ student loans, MPs say
Comparing student loan repayments to phone contracts or cinema tickets “amounts to mis-selling” by the government, a group of MPs have said.
In a new report, the Treasury Committee also said students were not informed clearly enough that loan terms could change retrospectively and called for a U-turn on the decision to freeze the income threshold at which some graduates start repaying their loans.
Last year Chancellor Rachel Reeves said the repayment threshold for students with Plan 2 loans would be frozen at £29,385 between 2027 and 2030, rather than rising with inflation.
Both the government and the Student Loans Corporation said the committee had made a “significant contribution” to the student finance debate.
A spokesperson for the Student Loans Corporation said it “recognises the importance of ensuring students and borrowers have access to clear, accurate and timely information about student finance across all repayment plans”.
A government spokesman said ministers had “already taken decisive action” and “will continue to look for ways to make the system fairer in a financially sustainable way for students, graduates and taxpayers”.
Plan 2 loans were taken out by students in England between September 2012 and July 2023 and are currently being offered in Wales. Graduates automatically pay back 9% of what they earn above the repayment threshold.
Freezing this threshold means graduates can start repaying their loans sooner or pay more as their salaries rise with inflation while the threshold remains the same.
The committee’s report cited BBC research which found the government compared student loan repayments to £30-a-month phone contracts in promotional presentations to young people a decade ago.
The report said this was “wrong for high-income earners” and that it “represents mis-selling.”
The committee noted that although the government’s student loan policies are exempt from consumer protection laws, it expects the government to “comply not only with the law but also with fundamental justice and public decency.”
