Over half of 52,000 graduates surveyed by the Treasury Committee admitted they did not understand their student loan terms,with many calling the system unfair and detrimental to their financial stability. The inqiury, focusing on Plan 2 loans introduced in 2012 and still used in Wales, revealed that graduates feel burdened and demoralized by debt.

Unfair Repayment Structure

Graduates repay 9 percent of their earnings above the current threshold of £28,470 under Plan 2. Many respondents described this structure as fundamentally unfair, with lower- and middle-income graduates bearing the heaviest burden over their lifetimes.

Respondents pointed out inequities, such as wealthier students avoiding interest by paying upfront, leading to disparities where graduates with similar salraies 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.

Government Response and Criticism

The government announced in April that interest on student loans would be capped at six percent for the next academic year. However, 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.

Dame Meg Hillier, chair of the committee, described the scale of frustration among graduates as powerful and alarming, noting that many feel overburdened and demoralized by debt.

Call for Radical Changes

The evidence suggests a deep-seated crisis of confidence in the student finance sytem. with thousands of graduates expressing their concerns, calls for more radical changes to ensure fairness and transparency are growing.

The committee will evaluate various options before issuing recommendations later this year.

Department for Education's Defense

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.