More than 52,000 graduates have shared their distressing experiences with student loans in response to an official inquiry, highlighting what the chair of a Commons committee described as a 'massive scale of frustration and upset.'
Inquiry Reveals Widespread Dissatisfaction
The Commons Treasury select committee launched an inquiry into student loans and graduate taxation, receiving over 52,000 responses. Many graduates reported that their debts are growing despite monthly repayments, due to high interest rates.
Pressure has been mounting on the government to reform the system, with critics arguing that interest rates and loan terms are punitive. The debate centers on 'plan 2' loans taken out by millions of students in England and Wales.
Key Complaints from Graduates
- Interest rates described as 'extortionate' and higher than mortgage rates.
- Repayment thresholds frozen at £29,385 until 2030, despite earlier promises of annual increases.
- 92% of respondents said interest and repayment terms are not reasonable.
- 81% said the financial impact was worse than expected.
- 57% admitted they did not understand the terms before taking out the loan.
One respondent called repayments 'a tax on ambition,' while another said they were told it would be 'less than a phone bill' but now pay hundreds of pounds monthly.
Mis-selling Allegations
The freeze on the salary threshold has sparked accusations of mis-selling. When plan 2 was introduced in 2010, ministers promised it would be 'uprated annually in line with earnings.' Official promotional materials from the Department for Education repeated this claim.
Treasury committee chair Meg Hillier said: 'The massive scale and strength of frustration and upset is powerful and, as MPs, we must listen.'
Government Response
In April, the government announced a cap on plan 2 loan interest rates at 6% from September. A spokesperson said: 'We inherited the current system and have taken steps to make it fairer, including raising the repayment threshold for the first time since 2021 and capping maximum interest rates.'
The government also reintroduced targeted maintenance grants and noted that the system protects lower-earning graduates, with repayments linked to income and any outstanding balance written off at the end of the loan term.
