Students received "misleading" advice from the government about loans to pay for their university education, the chair of a top parliamentary committee has told Sky News.
Dame Meg Hillier said the Department for Education "made a promise" about how Plan 2 student loans would be repaid, but that "hasn't been kept", which is having a "big impact on the generation who are paying off now".
The previous and impending freeze of the repayment salary threshold, which will see graduates earning above a set amount being dragged into making larger repayments as their salaries increase, led the top Labour MP to accuse successive governments of "balancing the books on the back of people who have taken out student loans".
Politics latest: Burnham hits back at Blair
The Treasury Select Committee on Wednesday published documents produced by the Department for Education (DfE) and a contractor in 2018 and 2020 to explain to prospective university students how Plan 2 loans - for those starting courses between September 2012 and July 2023 - worked.
They explained that they would only start repaying money to the Treasury once they earned more than a particular salary threshold, asserting: "The thresholds will be adjusted annually in line with average earnings."
However, the previous government then froze the repayment salary threshold from 2021 until 2025, and Chancellor Rachel Reeves has announced that it will be frozen again at the 2026 level until 2030, meaning graduates whose incomes rise with inflation will repay more to the Treasury in real terms.
The retrospective change to student loan repayment conditions is legal, as it was authorised in legislation, but the Treasury Select Committee boss said students were not fully informed of that possibility when they took out their loan(s), leading graduates to "feel angry and upset about the situation that they find themselves in".
"That's partly because when they took out the loans they did not realise what they were signing up to and the full implications of that," Dame Meg told Sky News.
She said that when the DfE "simplified" its advice to inform young people about the student loan system, they said "the threshold at which you start repaying will go up annually".
"Well, that actually hasn't happened in the end," she explained.
"You can understand that somebody in government thought it was a good idea to try and simplify that advice and make it clear for people to understand. But actually, you know, that was misleading."
Dame Meg noted that the government has faced a series of crises in recent years, pointing to the 2008 financial crisis and the COVID pandemic in particular, and all chancellors "make decisions in order to balance the books".
"But balancing the books on the back of people who've taken out student loans, and it's happened repeatedly under different governments, obviously it has had a big impact on the generation who are paying off now, and they feel very aggrieved by it, and not surprisingly," she said.
How do graduates view their loans now?
Her committee, which is conducting an inquiry into student loans and their impact on graduates, ran a survey earlier this year to understand their views on the system, and it received over 52,000 responses - one of the highest response rates to a select committee inquiry ever recorded.
The unweighted survey found that:
• Graduates overwhelmingly think the financial impact of repaying their loan(s) alongside the level of income tax is worse than expected, and has had a material impact on financial planning for the future;
• They believe that the level of interest and repayment terms are or were unreasonable;
• Graduates say they did not understand the full terms and conditions of their loan(s) before they took them out;
• A majority would not take out a loan if given the choice again.
Prospective students also submitted responses, and a majority told the committee that they do not have enough information to make an informed choice, and do not feel confident about making a decision.
Experts to give evidence to parliament
Asked what can be done, Dame Meg said there is a "huge understanding" on the Labour benches about the impact of student loans, and that is being communicated to the government.
Her committee will be taking evidence from expert witnesses over the coming weeks, and aims to produce a report before the summer recess begins in July, which members "hope" will include immediate recommendations for ministers to ease the burden.
"I wouldn't want to predict what they will be at this point, but we have an opportunity to press and push government to make some decisions that could make things better."
In response, a government spokesperson said: "We recognise that some graduates have concerns about the cost of student loan repayments and understand why this is an important issue.
"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. We have also reintroduced targeted maintenance grants to expand opportunities for people from all backgrounds to go to university or college.
"The student finance system protects lower-earning graduates, with repayments linked to income and any outstanding balances and interest written off at the end of repayment terms."
(c) Sky News 2026: Government gave 'misleading' information about student loans, senior committee chair tells Sk
Boy, 12, named as one of seven youngsters to have drowned during UK heatwave
Thunderstorms warning issued for parts of England and Wales
Resident doctors announce four-day strike in June
Mum-of-one named as victim of Bank Holiday shooting outside bar
