More than 52,000 graduates have poured their anger and dismay into an official inquiry, describing student loans that leave them trapped in ever-growing debt despite making monthly repayments. The House of Commons Treasury select committee, which launched the call for evidence as part of its wider examination of student loans and graduate taxation, said the response underlined “massive levels of frustration and upset” among borrowers.
Of the 49,357 respondents who had taken out a student loan, nine in ten said the interest rates and repayment terms were “not reasonable”. Four in five said the financial hit of repaying the loan combined with tax was worse than they had expected, and more than half admitted they had not understood the terms and conditions before signing up. In a stark indication of regret, 25,291 respondents said they would not take out their student loan again if given the choice.
Graduates described their experiences in blunt terms. One said the repayments acted “like a tax on ambition”. Another recounted: “I was told it would be less than a phone bill and barely noticeable. I am now an adult paying back hundreds of pounds a month. It was a complete lie.” Others called the interest rates “extortionate” and “higher than my mortgage”.
Meg Hillier, the chair of the Treasury committee, said: “The massive scale and strength of frustration and upset is powerful and, as MPs, we must listen.”
How the debt grows despite repayments
The inquiry focused on “Plan 2” loans – the system used by students in England and Wales who started courses between 2012 and 2023. Under this system, borrowers repay 9% of anything they earn above a salary threshold that currently stands at £29,385. But for many, the money taken from their wages each month is dwarfed by the interest piling up on the balance.
Plan 2 interest rates are tied to the Retail Prices Index (RPI) and can reach as high as RPI plus three percentage points. In March 2025, that rate stood at 6.2%. The Institute for Fiscal Studies estimates that an average Plan 2 graduate needs to earn around £66,000 a year just to keep pace with the interest accumulating on their loan. For those on lower and middle incomes, the debt grows relentlessly, leading critics to describe the loans as a “debt trap”.
The situation has been worsened by the government’s decision to freeze the repayment threshold at £29,385 for three years, until 2030. As salaries rise due to inflation or promotion, a larger slice of a graduate’s income becomes subject to the 9% charge – a phenomenon known as fiscal drag. The Welsh Government has said it will not apply the freeze, creating a split in terms between England and Wales.
For higher earners the impact is compounded: the 9% repayment rate combined with income tax and national insurance can push marginal tax rates as high as 71% on earnings between £100,000 and £125,000, particularly when factoring in the loss of childcare benefits.
Promotional materials and claims of mis‑selling
The Treasury committee published official student loan promotional materials it had obtained from the Department for Education, which repeated a key claim made when Plan 2 was announced by the coalition government in 2010: that the repayment threshold would be “uprated annually in line with earnings”. Graduates who relied on that assurance have seen the threshold repeatedly frozen, fuelling accusations of mis‑selling.
Official presentation slides dating from 2020 gave examples of monthly repayments of £15 and £60, then listed “other monthly costs for comparison”, including £10 for clubbing, £17 for cinema or gigs, and £14 for a mobile phone contract. Many respondents said those examples bore no resemblance to their actual experience, with three-figure sums now deducted from their pay packets every month.
In April, after the inquiry was launched, the government announced it would cap the Plan 2 interest rate at 6% from September, a temporary measure for the 2026/27 academic year aimed at protecting borrowers from inflation linked to global events.
A government 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 this year to protect graduates from rising costs.” They added that the government had reintroduced targeted maintenance grants for lower-income students, and 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.
