Student loan terms to be made clearer in England

University applicants in England will be given clearer information about student loans before they take them out, the government has said.

Ministers said they would spell out that governments can change repayment rules and that different career choices can affect how much borrowers repay.

They agreed to some but not all of the recommendations made by MPs after an inquiry into student loans, and did not say whether they would reverse a freeze to the repayment threshold for some graduates.

The inquiry found the way loans had been presented to teenagers amounted to mis-selling, after the BBC revealed the Department for Education (DfE) had compared repayments to £30-a-month phone contracts.

The recent debate has centred around Plan 2 loans, which were issued in England between September 2012 and July 2023, and are still issued in Wales.

The interest rate on those loans is the Retail Prices Index (RPI) measure of inflation plus up to 3% depending on earnings, and borrowers repay at a rate of 9% of everything they earn over a repayment threshold, which is meant to rise with inflation every year. The loans are written off after 30 years.

Campaigners want a lower interest rate, a lower repayment rate and for the government to reverse a decision last year to freeze the threshold at £29,385 for three years in England.

Freezing that threshold means graduates start repaying their loans sooner and, once they do, they pay more than they would have done if it had risen with inflation.

MPs on the Treasury Committee called for a U-turn on that decision as part of a series of recommendations after an inquiry this summer.

The Treasury and the DfE did not say whether ministers would unfreeze the threshold in their response, but said: “We keep all aspects of the student finance system under review.”

The government rejected recommendations to: