A cross-party group of MPs has accused successive governments of mis-selling student loans to millions of people in England and Wales, arguing that borrowers were encouraged to take on debt without receiving clear or accurate information about how the system would operate. The criticism forms part of a major report by the House of Commons Treasury Committee, which concludes that the student finance system has become “unfair and broken” and calls on ministers to restore trust by reversing recent policy changes and improving transparency. According to The Guardian, the committee’s findings follow an inquiry that attracted more than 52,000 responses from graduates and borrowers who described confusion, financial anxiety and a lack of understanding about the terms of their loans.
The Treasury Committee argues that official communications failed to explain important aspects of the student loan system, leaving many borrowers unaware that the conditions attached to their loans could be changed after they had signed up. According to the committee’s report, promotional material often presented student loans as manageable and affordable while omitting significant details about repayment terms, interest charges and the government’s ability to alter key conditions retrospectively.
Among the examples highlighted by MPs were government presentations comparing monthly student loan repayments to the cost of a mobile phone contract, a comparison the committee said risked trivialising a financial commitment that could last for decades. The report also criticised official videos and guidance that did not adequately explain that repayment thresholds, interest rates and other terms could be changed after graduates had entered the system. According to the Treasury Committee, these omissions meant borrowers were unable to make fully informed financial decisions before taking out loans.
The committee stops short of suggesting the government broke consumer protection law, as public sector student loans are not regulated in the same way as commercial financial products. However, MPs argue that if a private financial institution had marketed loans in a similar way, it would likely have faced serious scrutiny from regulators. The report states that while there may not be a legal obligation to compensate borrowers, there is a clear moral responsibility to address what it describes as years of misleading communication.
A central recommendation is for the government to reverse the decision announced in last year’s Budget to freeze the repayment threshold for Plan 2 student loans at £29,385 from April 2027 for three years. Under the current system, graduates repay 9% of their earnings above that threshold. By keeping the threshold fixed while wages are expected to rise, increasing numbers of graduates will repay more of their loans over time. According to the Treasury Committee, this represents a retrospective change to the financial agreement many borrowers believed they had accepted when entering higher education.
The committee describes the repayment threshold freeze as unfair because many students were originally told the threshold would increase in line with average earnings. MPs argue that changing the terms years after graduates had already committed to university has undermined confidence in the student finance system and weakened trust in government commitments. They say restoring the original policy would represent an important first step towards rebuilding confidence among borrowers.
The inquiry also examined how borrowers understood the student loan system when they first applied for finance. Evidence gathered by the committee suggests that more than half of respondents did not fully understand how repayments, interest or long-term borrowing costs worked at the point they took out their loans. Many participants reported assuming the loans operated like conventional commercial borrowing rather than an income-contingent repayment system, while others said they had not appreciated how policy changes could affect them years after graduation. According to the committee, this widespread misunderstanding demonstrates the need for much clearer information for future students.
Committee chair Dame Meg Hillier said the inquiry uncovered consistent evidence that graduates felt they had not been given the full picture before entering higher education. She argued that restoring public trust requires greater honesty about how student finance works, including clearer explanations of repayment obligations, interest calculations and the government’s powers to amend loan conditions. The report notes that this is one of the rare occasions on which the Treasury Committee has recommended reversing a Budget measure because of concerns about fairness and public confidence.
Beyond reversing the repayment threshold freeze, MPs are calling for broader reforms to improve transparency across the student finance system. Their recommendations include ensuring future communications clearly explain the long-term nature of repayments, avoiding comparisons that could minimise the financial commitment involved, and providing prospective students with more comprehensive information before they make decisions about university. The committee also believes student loans should be presented in a way that accurately reflects their complexity, rather than through simplified marketing messages.
The government has acknowledged the committee’s report and said it will consider its recommendations. According to The Guardian, ministers maintain that they are committed to creating a student finance system that remains fair for graduates while also being financially sustainable for taxpayers. The government has also pointed to previous measures, including a cap on student loan interest rates, as evidence that it has sought to reduce costs for borrowers.
While ministers have yet to indicate whether they will reverse the repayment threshold freeze, the Treasury Committee’s report is likely to intensify debate over the future of higher education funding in England and Wales. Its findings raise broader questions about how governments communicate major financial commitments to young people and whether the balance between supporting access to university and protecting graduates from unexpected policy changes has been struck fairly. As policymakers consider the committee’s recommendations, the report is expected to play a significant role in shaping future discussions about student finance reform and restoring confidence in a system that millions of graduates continue to navigate.