Phone contract comparisons ‘amounted to mis-selling’ student loans, MPs say

Comparing student loan repayments to phone contracts or cinema tickets “amounted to mis-selling” by government, a group of MPs has said.

In a new report, the Treasury Committee also said students were not told clearly enough loan terms could change retrospectively, and called for a U-turn on the decision to freeze the income threshold at which some graduates start repaying their loans.

Last year, Chancellor Rachel Reeves said the repayment threshold for students with Plan 2 loans would be frozen at £29,385 between 2027 and 2030, instead of rising with inflation.

Both the government and Student Loans Company said the committee had made “an important contribution” to the student finance debate.

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”.

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”.

Plan 2 loans were taken out by students in England between September 2012 and July 2023, and are still issued in Wales. Graduates automatically pay back what they earn above the repayment threshold at a rate of 9%.

Freezing that threshold means graduates start repaying their loans sooner, or pay more as their salaries increase with inflation while the threshold remains the same.

The committee’s report referenced a BBC investigation which found the government compared student loan repayments to £30-a-month phone contracts in promotional presentations to teenagers a decade ago.

As this was “inaccurate for higher earners”, that “amounted to mis-selling”, the report said.

The committee noted that while the government’s 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”.