Thousands of graduates have informed a parliamentary inquiry that they were unaware of the implications when taking out student loans. The investigation, launched by the Treasury Committee, is assessing whether repayment conditions are 'reasonable' for graduates.
Survey Results Show Widespread Confusion
Over half of the 52,000 individuals who responded to the committee's call for evidence admitted they did not comprehend the terms they agreed to. Additionally, 45,843 respondents argued that the repayment conditions are unjust. Some 25,191 stated they would not take out a student loan if given the chance to reconsider, even though most acknowledged they could not have attended university without financial assistance.
Focus on Plan 2 Loans
The inquiry was prompted by controversy surrounding Plan 2 loans, issued in England from September 2012 to July 2023 and still current in Wales. Under this plan, graduates repay 9% of earnings above the £28,470 threshold, a system described by respondents as inequitable. The government announced in April that student loan interest would be capped at 6% for the next academic year to shield graduates from inflation linked to the war in Iran.
Campaigners welcomed Labour's move but urged broader reforms in higher education. Shadow education secretary Laura Trott criticized the measures, stating: 'Labour are tinkering around the edges, while graduates will still be paying interest above inflation. These proposals do not go far enough and confirm Labour have no serious plan to stop graduates being ripped off.'
Impact on Mortgages and Homeownership
The committee overseeing the inquiry noted a strong perception that 'poorer and middle-income' graduates bear the highest lifetime repayments. It also highlighted that repayments 'directly reduce mortgage availability', leaving respondents unable to purchase homes or secure mortgages. One respondent complained: 'It's fundamentally unfair that students with wealthy parents can be bought out of paying interest on their tuition fees entirely. If I am on the same salary doing the same job as a wealthy graduate who paid upfront, I will pay far more for far longer compared to them.'
Another graduate stated: 'I was told it would be less than a phone bill and barely noticeable. I am now an adult paying back £100s a month. It was a complete lie. It's reduced my mortgage affordability, the amount I am able to invest or spend in the economy.'
Committee Chair's Response
Dame Meg Hillier, chairwoman of the committee, described the 'massive scale and strength of frustration and upset' among graduates as powerful. 'Unfortunately, what these findings tell us is that far too many young people feel over-burdened and demoralised by their student debt,' she said. The committee will consider various options before making recommendations for change, with a report expected later this year.
A spokesperson for the Department of Education stated: 'We have 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. The student finance system protects lower-earning graduates, with repayments linked to income and any outstanding balances and interest written off at the end of repayment terms.'
