A Treasury Committee inquiry found that over half of 52,000 graduate respondents did not understand their student loan terms, with many calling the system unfair and detrimental to financial stability, particularly for middle-income earners.
Thousands of graduates have revealed to a parliamentary inquiry that they did not fully understand what they were signing up for when they took out student loans .
The Treasury Committee launched the inquiry to examine whether current repayment terms are reasonable for graduates. Over half of the 52,000 respondents to the committee's call for evidence admitted they did not understand their loan agreements, and 45,843 explicitly argued that the repayment terms are unfair.
Meanwhile, 25,191 said they would not take out a student loan again if given the chance, even though most acknowledged they would not have been able to attend university without financial support. The inquiry focuses particularly on Plan 2 loans, introduced in England in September 2012 and July 2023, and still used in Wales. Under this system, graduates repay 9 percent of their earnings above the current threshold of £28,470, a structure many respondents described as fundamentally unfair.
In response to concerns, the government announced in April that interest on student loans would be capped at six percent for the next academic year, aiming to protect graduates from inflation-driven costs exacerbated by global events such as the war in Ukraine. While campaigners welcomed Labour's proposal to cap interest, they emphasized that broader reforms to the higher education financing system are necessary.
Shadow education secretary Laura Trott criticized the measure as insufficient, stating that graduates would still face interest rates above inflation and that the government lacked a serious plan to stop exploitation. The committee highlighted a widespread perception that lower- and middle-income graduates bear the heaviest burden over their lifetimes, with repayments directly reducing mortgage eligibility and hindering homeownership.
Many respondents pointed out inequities, such as wealthier students avoiding interest by paying upfront, leading to disparities where graduates with similar salaries end up paying vastly different totals. One graduate noted being told repayments would be minimal, only to face hundreds of pounds monthly, severely impacting savings, investments, and economic participation. Committee chair Dame Meg Hillier described the scale of frustration among graduates as powerful and alarming, noting that many feel overburdened and demoralized by debt.
The committee will evaluate various options before issuing recommendations later this year. A Department for Education spokesperson defended existing safeguards, citing raised repayment thresholds and interest caps to protect lower-earning graduates, and reminded that loans are written off after the repayment term.
However, the evidence suggests a deep-seated crisis of confidence in the student finance system, with calls for more radical changes to ensure fairness and transparency
Student Loans Repayment Terms Treasury Committee Plan 2 Loans Graduate Debt Higher Education Financing Interest Cap Mortgage Affordability Fairness Parliamentary Inquiry
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