Committee report

The Treasury Committee published a report on 6 July 2026 that sharply criticises the government's handling of Plan 2 student loans. The cross-party group, chaired by Labour MP Dame Meg Hillier, said promotional material used a decade ago made inaccurate cost comparisons and failed to warn that loan terms could be changed retrospectively.

“It is not common for a Treasury Select Committee, made up of MPs from the three largest parties, to agree that a specific budget measure announced by a Chancellor must be reversed. Our report is a signal to the Treasury and the Department for Education that this can no longer be ignored. Patience has run out.”

Mis-selling accusation

The report references a BBC investigation that found the government compared student loan repayments to £30-a-month phone contracts in presentations to teenagers. The committee said this "amounted to mis-selling" because it was inaccurate for higher earners. While student loans are exempt from consumer protection laws, the MPs said they expected the government to comply with "basic fairness and common decency".

“The student loan system is unfair, unsustainable and in urgent need of reform.”

Threshold freeze and its impact

Chancellor Rachel Reeves announced in the October 2025 Budget that the repayment threshold for Plan 2 loans would be frozen at £29,385 from 2027 to 2030, instead of rising with inflation. Graduates repay 9% of earnings above the threshold, so the freeze means they start repaying sooner or pay more as salaries increase. The committee said the system is "layering stress on to people in their twenties and thirties in a way that did not apply to previous generations".

Cost dispute

Reversing the freeze would cost £355 million by the 2029-30 financial year, according to the MPs, who called it a "modest fiscal reversal". The government, however, says it would require more than £5 billion of extra borrowing. The committee urged the next chancellor to find the money at the autumn Budget.

Political pressure

The report lands as Andy Burnham is poised to become prime minister, with the committee pressing him to act in his first Budget. Outgoing PM Sir Keir Starmer had promised to look at ways to make the system fairer, but Reeves and Education Secretary Bridget Phillipson have prioritised other spending. The government said it is "already taking decisive action" and will "continue to look for ways to make the system fairer".