England to give students clearer warnings on loan terms after mis-selling row
University applicants in England will get clearer warnings about student loans before they sign up, after the government moved to tighten the way borrowing terms are explained. Ministers will now spell out that repayment rules can change and that career choices can alter how much graduates pay back.
The change comes after MPs accused the current system of falling short and, in effect, misleading teenagers. The row sharpened after the BBC reported that the Department for Education had compared loan repayments with £30-a-month phone contracts. Not the same thing.
MPs press for better disclosure
The government said it had accepted some, but not all, of the recommendations from a parliamentary inquiry into student loans. It stopped short of saying whether it would reverse a freeze on the repayment threshold for some graduates.
The inquiry found the way loans were presented to young people amounted to mis-selling. It argued that borrowers were not made clear enough about how the terms could shift over time.
Officials will revise guidance so it states plainly that student loan terms are set in law and can be changed by future governments. The government will also provide more detail on how life and career decisions can affect repayments.
Plan 2 loans under scrutiny
The debate has focused on Plan 2 loans, which were issued in England between September 2012 and July 2023 and are still issued in Wales. Borrowers repay 9% of everything they earn above a threshold, with interest set at the Retail Prices Index measure of inflation plus up to 3%, depending on earnings.
That threshold is supposed to rise with inflation each year. The loans are written off after 30 years.
Campaigners want lower interest rates and a lower threshold for repayments. That fight is not over. The next battleground is whether ministers will revisit the freeze on the earnings level at which repayments begin. For some graduates, that line now sits still while prices move on.
