Government agrees to clarify student loan terms in England

Following a House of Commons Treasury Committee report, the government has said it will be taking action to make student loan terms clearer for oncoming generations of students.

The House of Commons Treasury Committee, led by Dame Meg Hillier, welcomed the commitment as an opportunity to “right a historical wrong,” while the government acknowledged that “more can be done.”

In the past, the Government had compared the repayment procedure of a student loan to a phone contract costing £30-a-month, and encouraged presenters to avoid words or phrases like debt when presenting in schools across England.

The Committee found that these actions were equivalent to “mis-selling” the terms of student loans to teenagers across England.

The student loan system is unfair, unsustainable, and in urgent need of reform

Oliver Gardner, founder of Rethink Repayment

Oliver Gardner, founder of campaign group Rethink Repayment, said the Committee’s inquiry had concluded “what we have known for years”.

He added: “The student loan system is unfair, unsustainable, and in urgent need of reform.”

Sir Philip Augar, chairman of the Augar review into the funding of higher education, said that successive governments had altered some student loan terms in an “almost sneaky way”.

The Government was presented with several options for altering the student loans system: splitting the costs of university between the student and the government; stopping the use of Retail Price Index (RPI); and ensuring that the promotional material for student loans complies with the Financial Conduct Authority’s Consumer Duty.

The government has rejected all three of these recommendations.

Instead, the government has said it will clarify the terms of student loans, explaining that future governments can change repayment rules, and that a student’s chosen career can affect how much they are able to repay and when.

This follows the decision of former Chancellor Rachel Reeves to freeze the repayment threshold on student loans, an action that could cause higher repayments for many students in the long run.

A group of 121 MPs and peers have called upon John Healey, the recently-appointed Chancellor, to urgently review the student loan repayment system.

Dame Meg Hillier, the Chair of the Treasury Committee, said: “I recognise that finances are tight, but I continue to urge the chancellor to look at this again.”