6 hours ago

Hazel Shearing ,Education correspondentand Emily Holt ,Education reporter An inquiry into student loans is being launched by MPs amid "widespread dissatisfaction" over repayment terms.

The Treasury Committee will examine whether the recent decision to freeze the repayment threshold for many graduates in England is fair.

The inquiry will also look at whether repayment terms are "reasonable" when considered alongside the "broader taxation of graduates" such as income tax.

The Department for Education (DfE) said the freezes aimed "protect taxpayers and students".

The inquiry will look at all student loan plans but the recent controversy has surrounded Plan 2 loans, which were issued in England between September 2012 and July 2023 and are still issued in Wales.

Graduates with Plan 2 loans pay back 9% of everything they earn over the repayment threshold.

The Chancellor Rachel Reeves announced in November's budget the threshold would be frozen at £29,385 between 2027 and 2030, rather than rising with inflation.

That means graduates will start repaying sooner and those earning above the threshold will see a greater proportion of their salary subjected to student loan repayments than they would have done.

Campaigners have called for the freezes to be reversed, as well as a lower repayment rate and a lower interest rate - which is currently the Retail Prices Index (RPI) measure of inflation for graduates plus up to 3% depending on earnings.

Dame Meg Hillier, chair of the Treasury Committee, said many people had benefited from widened access to higher education through the student loan system, but the inquiry would ask whether "the goalposts been moved in a way which is unfair to graduates".

"Upward interest rates and sometimes particularly high marginal tax rates have clearly led to widespread dissatisfaction among graduates who may not have fully understood their repayment terms and the possibility they could change," she said.

Natalie Whittaker, 27, doesn't regret going to university but feels she was not "properly informed" about the financial ramifications of taking out a Plan 2 loan.

She started a media production degree at the University of Salford in 2016 and a masters at the University of Liverpool three years later.

The interest means that, despite making repayments, her £52,000 debt on leaving university has since risen to around £75,000 "We were told it's not real debt, or it's just the price of a coffee, or you won't even notice it leaving your pay cheque," she said.

"But we are now at the age where we are earning enough to start making repayments and we're thinking, 'hang on a minute, this isn't the price of a coffee'. "

The inquiry comes after the BBC found that the government compared student loan repayments to a £30-a-month phone contract in a presentation to teenagers a decade ago, and presenters were asked not to use the word "debt".

On Wednesday, Sir Nick Clegg, the former Liberal Democrat leader, told the BBC the current university tuition fee system was a "mess".

BBC analysis has found that the amount of money graduates are voluntarily paying to try to clear their debt has risen, while some graduates told us the combination of loan repayments and income tax has led them to slash their salaries.

The DfE said it had inherited a student loans system "devised by the previous government" and the freezes were there to "protect taxpayers and students".

It said the system "protects lower-earning graduates" with income-linked repayments and balances that are written off after a certain period of time.

On Wednesday, Reeves told MPs there was a "hierarchy of priorities".

"I do recognise that we inherited a broken system when it comes to student finance, as we inherited a broken NHS, a prison system and much more," she said. The committee is inviting anyone over the age of 16 to share their experiences of the system via an online survey.

It will look at the system in England but will welcome submissions from other parts of the UK

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