The government has responded following MPs' confirmation that student loan promotion in England and Wales amounted to mis-selling. The Treasury Select Committee has emphasized that Labour Party ministers have a moral duty to reverse last year’s freeze on the repayment threshold for plan 2 student loans.
Last year, Chancellor Rachel Reeves froze the plan 2 repayment threshold at £29,385 for three years starting April 2027. Graduates earning above this threshold are required to repay 9% of their income above that amount.
On July 7, the Treasury Select Committee issued a major update calling on ministers to uphold the original terms under which the loans were sold to young people. The committee criticized successive governments for choosing politically convenient policies that shift financial burdens onto younger generations, predicting these consequences would be felt only in the future.
READ MORE: Andy Burnham Proposes Four New Council Tax Bands in Prime Ministerial Plan
READ MORE: DWP Urged to Tighten PIP Eligibility for ADHD, Autism, Depression, and Anxiety
Plan 2 loans apply to students who began university between September 2012 and July 2023.
Meg Hillier, chair of the Treasury committee, said: “Our report sends a clear signal to the Treasury and the Department for Education that this issue can no longer be ignored. Patience has run out.” She described reversing the threshold freeze as a “modest change” that would not require significant resources while helping to rebuild trust between graduates and policymakers overseeing the student loan system.
A government spokesperson called the committee’s report “an important contribution to the debate on improving the student finance system” and acknowledged the inherited system as “confused and broken.” They stressed the importance of providing students with clear and accurate information to enable informed decisions and confirmed ongoing collaboration with the Student Loans Company on better communications for students.