The UK Treasury Committee has found that government comparisons of student loan repayments to £30-a-month phone contracts or cinema tickets "amounted to mis-selling", according to a new report. The committee also said students were not told clearly enough that loan terms could change retrospectively, and called for a U-turn on the decision to freeze the income repayment threshold.
Key Findings of the Treasury Committee Report
| Finding | Detail |
|---|---|
| Mis-selling | Comparing student loan repayments to £30-a-month phone contracts was "inaccurate for higher earners" and "amounted to mis-selling" |
| Threshold freeze | Chancellor Rachel Reeves froze the Plan 2 repayment threshold at £29,385 between 2027 and 2030, preventing it from rising with inflation |
| Retrospective changes | Students were not clearly told that loan terms could change retrospectively |
| Consumer protection exemption | The committee noted that while student loan policies were exempt from consumer protection laws, it expected the government "to comply with not only the law, but basic fairness and common decency" |
The report referenced a BBC investigation that found the government used the phone contract comparison in promotional presentations to teenagers a decade ago. The committee said this was "inaccurate for higher earners", amounting to mis-selling.
Impact on Graduates
Plan 2 loans were taken out by students in England between September 2012 and July 2023 and are still issued in Wales. Graduates automatically repay 9% of earnings above the threshold. Freezing that threshold means graduates start repaying their loans sooner, or pay more as salaries increase with inflation while the threshold remains the same.
Laura-May Nardella, a 31-year-old Cambridge graduate working in HR, said her repayments total hundreds of pounds a month. In 2025, she paid over £3,000. "That isn't a phone bill. That's three brand new phones," she said. She noted that despite her payments, her overall debt increased because her Plan 2 loan accrued interest at a rate of 6.2%.
"It's quite psychologically draining," Nardella said, adding that she and her husband pay almost the same on student loan repayments as their mortgage each month.
Reactions
Oliver Gardner, founder of campaign group Rethink Repayment, said the inquiry had concluded "what we have known for years. The student loan system is unfair, unsustainable and in urgent need of reform."
Lewis Wilson, from the National Union of Students, said the next Labour administration could bring in "immediate fixes" by raising the repayment threshold and lowering the repayment rate, but said the system needed "fundamental reform" in the coming years.
Government and Student Loans Company Response
A spokesperson for the Student Loans Company said they "recognise the importance of ensuring that students and borrowers across all repayment plans have access to clear, accurate and timely information about student finance." Both the government and the Student Loans Company stated that the committee had made "an important contribution" to the student finance debate.
A government spokesperson said ministers were "already taking decisive action" and would "continue to look for ways to make the system fairer for students, graduates and taxpayers in a financially sustainable way."
Implications for Finance Professionals
The committee's finding that promotional comparisons "amounted to mis-selling" carries direct implications for treasury and finance executives overseeing product disclosure and regulatory compliance. The report highlights that even when exempt from consumer protection laws, government and financial institutions must adhere to standards of fairness. For trade finance professionals, the frozen repayment threshold effectively reduces disposable income for graduates, potentially dampening consumer demand and affecting trade flows. The 6.2% interest rate on Plan 2 loans also illustrates how interest rate policy can impact household balance sheets and, by extension, spending patterns. Finance executives should monitor the government's response and any future reforms to the student loan system, as changes to repayment terms could alter consumer behavior and credit risk profiles.
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