Treasury Committee Accuses UK Government of Mis-selling Student Loans

The Commons Treasury Committee has issued a report accusing successive UK governments of "mis-selling" student loans to teenagers and unfairly burdening graduates. The cross-party committee is calling on the next Chancellor to scrap a three-year freeze on repayment thresholds, which maintains the limit at £29,385 from 2027 to 2030. This freeze, announced by Rachel Reeves in the October Budget, would cost an estimated £355 million to reverse by 2029-30.

MPs allege that the Department for Education and the Student Loans Company used deceptive promotional materials, such as YouTube videos, that compared loan repayments to low-cost mobile phone contracts while concealing the government's power to change loan terms retrospectively. The committee noted that because loans are statutory rather than contractual, the government can alter interest rates and thresholds without legal obligation to inform borrowers.

In addition to reversing the freeze, the committee recommends replacing the retail prices index with the consumers prices index for interest calculations and transitioning future loans to a contractual framework to provide greater legal protections. The report also suggests a 50:50 cost split between the state and graduates.

The Government of the United Kingdom defended its position, stating it inherited a broken system. Officials highlighted recent actions to protect graduates, including capping interest rates at 6% and reintroducing maintenance grants. The Student Loans Company stated it would continue to work with the Department for Education on actions arising from the report.