Graduates branded ‘cash cows’ in UK student loan inquiry

The UK Commons Treasury select committee has heard testimony from student representatives and policy experts alleging that graduates with Plan 2 loans are being exploited to fund public services, specifically the state pension triple lock. Witnesses described the current repayment structure as an intergenerational crisis, arguing that above-inflation interest rates and frozen salary thresholds are causing debts to balloon while generating revenue for older demographics.

Ollie Gardner, founder of the campaign group Rethink Repayment, provided a case study of a 33-year-old NHS doctor nearing consultant status who has already accrued £38,000 in interest. Gardner stated that this individual is expected to repay between two and two-and-a-half times the original loan amount. He argued that Chancellor Rachel Reeves’s decision to freeze the Plan 2 repayment threshold at £29,385 until 2030 effectively uses graduates as the mechanism to generate the £15bn annually projected for the pension triple lock by 2030.

Philip Augar, who led the 2019 government review into post-18 education funding, told MPs that the handling of loan terms resembled financial mis-selling scandals. Augar compared the situation to the car finance and payment protection insurance (PPI) controversies, suggesting that the government had failed in its duty of customer care by retrospectively changing terms in a complicated manner. He expressed outrage that graduates signed up for conditions that were not properly explained, noting that a financial services organisation would face severe regulatory scrutiny for similar practices.

The inquiry focused on the structural issues within the Plan 2 system, which applies to students in England and Wales. Critics argue that monthly repayments are often dwarfed by monthly interest additions, leading to increasing debt balances despite regular payments. The debate has intensified following pressure on the government to reform the system, with campaigners describing the rules as unfair due to these retrospective changes and the lack of threshold adjustments since 2021.

A UK government spokesperson defended the system, stating that it protects lower-earning graduates by linking repayments to income and writing off any outstanding balance and interest at the end of the loan term. The spokesperson highlighted that the government has capped maximum interest rates and raised the repayment threshold for the first time since 2021, while also reintroducing targeted maintenance grants to mitigate costs for students.