Treasury Committee: Student Loans Were Mis-Sold and the Threshold Freeze Must Be Reversed
MPs find the government has a “moral obligation” to undo the Plan 2 freeze, and identify three instances where official communications amounted to mis-selling
Key Takeaways
- The Treasury Committee published its student loans report on 7 July 2026, calling on the government to reverse the Plan 2 repayment threshold freeze at the next Budget. The threshold is currently set to stay at £29,385 from April 2027 to April 2030.
- MPs concluded that the actions of the Department for Education and the Student Loans Company amounted to mis-selling in three specific instances, even though the government is legally exempt from being held liable for it.
- The report recommends that student loan interest be linked to the Consumer Prices Index rather than the Retail Prices Index, which typically runs higher and currently drives the Plan 2 rate.
- Evidence submitted to the inquiry suggested the funding balance for a university education could now be as much as 95% paid by the individual and 5% by the taxpayer. The Committee recommends moving towards 50:50 in the long term.
- Nothing in the report changes your repayments today. Your threshold, rate and interest are unchanged until the government formally responds or legislates, so plan on the current rules while the reform debate runs.
In this article
What the Committee Concluded
On 7 July 2026 the House of Commons Treasury Committee published the report of its inquiry into student loans in England. The headline conclusion is blunt: the government has a moral obligation to reverse the decision to freeze the Plan 2 repayment threshold, and should do so at the next Budget.
The inquiry was launched in March 2026 amid what MPs described as widespread dissatisfaction with repayment terms. It attracted more than 52,000 responses to its public survey, one of the highest response rates to any select committee inquiry on record.
The Committee's central charge is about broken promises. When Plan 2 loans were announced in 2010, the government said the £21,000 earnings threshold would be uprated annually in line with earnings from 2016. Instead it was frozen from 2016 to 2018, frozen again from 2021 to 2025, and in the November 2025 Budget the then-Chancellor announced a third freeze running from 2027 to 2030.
The Committee's core finding
MPs concluded that successive governments have taken the politically convenient option of loading burdens onto younger generations, hoping they will not notice until future years.
“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.”
“Ministers openly accept that the system is broken and unfair but have said that it is not a priority to fix it. While I understand that there are many competing pressures on a government, reversing last year's threshold freeze is a modest change that would not eat up vast resources.”
Dame Meg Hillier, Chair of the Treasury Committee
The Three Mis-Selling Findings
The government is exempted from ever being held legally liable for mis-selling student loans. The Committee concluded that, legal exemption aside, the conduct of the Department for Education and the Student Loans Company amounted to mis-selling in three specific instances.
1. Undisclosed power to change terms retrospectively
The DfE produced YouTube videos and presentation slides that did not disclose that the government could vary the terms and conditions of loans retrospectively. This is the single most consequential omission, because every threshold freeze since 2016 has relied on exactly that power.
2. The phone contract and cinema ticket comparisons
The DfE produced promotional material that compared the monthly cost of student loan repayments to a mobile phone contract or cinema tickets. The Committee found this was inaccurate for higher earners, and that presenting it to teenagers amounted to mis-selling. The finding follows a BBC investigation published in March 2026 which uncovered presentations given in schools a decade ago comparing repayments to a £30-a-month phone contract.
3. The SLC application process
The Committee found the Student Loans Company does not make it sufficiently clear during the loan application process that the government can retrospectively change the terms and conditions. The fact appears in the guide to student loans, but without the additional emphasis that would be expected of a commercial contract.
The consumer protection point: the Committee argued the government should comply with consumer protection law and financial services regulation such as the Consumer Duty even though it is not bound by them, particularly when it comes to telling students plainly that future governments may change the terms of their loans. It said it expected the government to comply with not only the law, but basic fairness and common decency.
Reverse the Threshold Freeze
The Committee's central recommendation is that the government honour the terms under which the loans were sold by reversing the 2025 Budget threshold freeze at its next Budget.
The Plan 2 threshold timeline
| Period | Threshold | Status |
|---|---|---|
| 2010 announcement | £21,000 | Promised annual earnings uprating from 2016 |
| 2016 to 2018 | £21,000 | First freeze |
| 2021 to 2025 | £27,295 | Second freeze, indexation switched to RPI |
| April 2025 | £28,470 | First increase since 2021 |
| April 2026 (current) | £29,385 | In force now |
| 2027 to 2030 | £29,385 | Third freeze, the one MPs want reversed |
Freezing the threshold means graduates start repaying sooner than they otherwise would, and pay progressively more as salaries rise while the threshold stands still. That mechanism is fiscal drag, and it works quietly: no rate rises, no new deduction appears on your payslip, but your repayment climbs every year in real terms.
Model your own exposure: use the Plan 2 threshold freeze guide for the full mechanics, or run your salary through the career progression calculator to see how the freeze compounds as you get pay rises.
Link Interest to CPI, Not RPI
The report restates the Committee's continued belief that interest on student loans must be linked to the Consumer Prices Index rather than the Retail Prices Index.
This matters because RPI is the higher measure in most years and is no longer designated as a national statistic. Every Plan 2, Plan 3, Plan 1, Plan 4 and Plan 5 interest rate is currently anchored to the March RPI figure, so the choice of index feeds directly into how fast balances grow.
Already changing: separately from this report, the government announced on 7 April 2026 that interest on Plan 2 and Plan 3 loans will be capped at 6% from 1 September 2026 for the 2026/27 academic year, instead of RPI plus 3%. That cap applies in England and Wales and does not cover Plan 1, Plan 4 or Plan 5. See our student loan interest rates guide for the current figures on every plan.
The 95:5 Funding Problem
Evidence submitted during the inquiry suggested that for people studying today, the funding balance for a university education could be as much as 95% paid by the individual and 5% subsidised by the taxpayer.
The Committee took the view that university education benefits not only individuals but the state and wider society, and recommended the government move towards an overall 50:50 funding balance in the long term. That is a structural recommendation rather than a costed policy, and it is the part of the report least likely to be actioned quickly.
Why the split has shifted
Three changes have moved cost from the taxpayer to the graduate over the last fifteen years: tuition fees tripled to £9,000 in 2012 and have since risen to £9,790 for 2026/27, maintenance grants were replaced with loans in 2016, and the Plan 5 write-off period was extended from 30 to 40 years in 2023.
Each change individually looked technical. Together they moved the majority of the cost of a degree onto the person taking it.
What the Report Says About Plan 5
Plan 2 loans were replaced for new undergraduates in England by Plan 5 loans in 2023. The Committee found that this shifted the burden of paying for higher education away from the highest earners and towards all loan holders.
| Feature | Plan 2 | Plan 5 |
|---|---|---|
| Repayment threshold | £29,385 | £25,000 |
| Repayment rate | 9% above threshold | 9% above threshold |
| Interest | RPI to RPI plus 3%, capped at 6% from Sept 2026 | RPI only, no margin |
| Write-off | 30 years | 40 years |
The lower threshold pulls in more low and middle earners, and the extra ten years before write-off means far more of them repay for far longer. A Plan 5 borrower on an average salary makes noticeably higher annual repayments than a Plan 2 borrower on the same salary. Compare the two side by side in our Plan 2 vs Plan 5 comparison.
Reactions from Government and Campaigners
Government
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. That is not a commitment to reverse the freeze.
Student Loans Company
The SLC said the Committee had made an important contribution to the student finance debate, and that it recognises the importance of ensuring students and borrowers across all repayment plans have access to clear, accurate and timely information.
Rethink Repayment
Oliver Gardner, founder of the campaign group, said the inquiry had concluded what campaigners have known for years, describing the system as unfair, unsustainable and in urgent need of reform.
National Union of Students
Lewis Wilson of the NUS said immediate fixes were available by raising the repayment threshold and lowering the repayment rate, but that the system needs fundamental reform in the coming years.
What This Means for Your Repayments
A select committee report is a recommendation, not a change in the law. Nothing about your deductions changes because of it. Here is what is actually settled and what is not.
Settled right now
- Plan 2 threshold is £29,385 for 2026-27
- Repayment rate is 9% above the threshold
- Plan 2 and Plan 3 interest is capped at 6% from 1 September 2026
- The 2027 to 2030 freeze remains government policy
Still open
- Whether the freeze is reversed at the next Budget
- Whether interest moves from RPI to CPI
- Whether the funding balance shifts back towards the taxpayer
- Whether any change is retrospective or applies to new borrowers only
Practical advice: do not change your financial plans in anticipation of reform. If you are weighing voluntary overpayments, the calculation still turns on whether you are on track to clear the balance before write-off, not on what a committee has recommended. Check where you stand with the interest calculator first.
The Committee's evidence sessions also touched on the SLC's record-keeping, including the case where the SLC lost track of 370,000 graduates owing repayments, and on how borrowers have used the courts to challenge SLC decisions, covered in our roundup of student loan court cases and precedents.
Sources
- Treasury Committee, Student loans report, published 7 July 2026. publications.parliament.uk
- Treasury Committee news release, “Government has moral obligation to reverse freezing of student loans repayment threshold”, 7 July 2026. committees.parliament.uk
- BBC News, “Phone contract comparisons amounted to mis-selling student loans, MPs say”, 7 July 2026. bbc.co.uk
- GOV.UK, “Interest rate cap introduced to protect Plan 2 borrowers”, 7 April 2026. gov.uk
- HMRC, rates and thresholds for employers 2026 to 2027, for all threshold figures. gov.uk
Frequently Asked Questions
Does the Treasury Committee report change my student loan repayments?▼
No. A select committee report makes recommendations to government and carries no legal force. Your Plan 2 threshold remains £29,385 for 2026-27, your repayment rate remains 9% of everything you earn above it, and the freeze from April 2027 to April 2030 remains government policy unless the Chancellor reverses it at a future Budget.
If MPs say student loans were mis-sold, can I claim compensation?▼
No. The Committee was explicit that the government is exempted from ever being held legally liable for mis-selling student loans. Its finding is a judgement about conduct and fairness, not a legal ruling, and it does not create a route to redress. Be cautious of any firm offering to reclaim student loan repayments on your behalf on the strength of this report.
What were the three instances of mis-selling the Committee identified?▼
First, DfE YouTube videos and slides that did not disclose the government could change loan terms retrospectively. Second, DfE promotional material comparing monthly repayments to a mobile phone contract or cinema tickets, which was inaccurate for higher earners. Third, the SLC application process, which discloses the power to change terms in the guide to student loans but without the emphasis expected of a commercial contract.
Why does the Committee want interest linked to CPI instead of RPI?▼
RPI is generally the higher of the two inflation measures and is no longer designated as a national statistic, yet it sets the interest rate on every UK student loan plan. Linking to CPI would slow the growth of loan balances. The Committee has held this position across multiple reports. It is a recommendation only, and student loan interest remains RPI-linked today at a 4.1% basis, with a 6% cap applying to Plan 2 and Plan 3 since 1 September 2026.
How many people responded to the Treasury Committee inquiry?▼
More than 52,000 people responded to the Committee's online survey, one of the highest response rates to a select committee inquiry on record. Thousands said they did not fully understand the terms and conditions of their loans before taking them out, which fed directly into the mis-selling findings.
Does the report affect Plan 1, Plan 4 or Plan 5 borrowers?▼
The threshold freeze recommendation applies only to Plan 2. The CPI recommendation and the 50:50 funding recommendation would affect all plans if adopted. The report also criticised the Plan 5 design for shifting the burden of paying for higher education away from the highest earners and towards all loan holders, through its lower £25,000 threshold and 40-year write-off.
Related Resources
Plan 2 Threshold Freeze Guide
The full mechanics of the 2027 to 2030 freeze and what it costs you
Martin Lewis vs Rachel Reeves
The political clash that preceded this report
Plan 2 Explained
Thresholds, interest and write-off rules for Plan 2 borrowers
Student Loan Interest Rates
Current rates on every plan and how the 6% cap works
Student Loan Calculator UK Editorial Team
Editorial Team
This page is maintained by the Student Loan Calculator UK editorial team, checked against GOV.UK and Student Loans Company guidance. Read more about our editorial approach.