MPs have finally come to the conclusion that many graduates did years ago – their student loans were mis-sold to them.
A new scathing report by the Treasury Committee – a cross-party group of lawmakers – has said that the student loan system is “broken and unfair”.
It said that governments have taken the politically convenient option of loading burdens on to younger generations, hoping that they will not notice until future years.
The problem is thousands of graduates have noticed – and have long been shouting about it.
Many remember the government’s communications at the time, which compared the monthly cost of a student loan to a mobile phone contract or cinema tickets, and which the Treasury Committee has concluded was inaccurate for higher earners.
Even more are aware of the frozen repayment thresholds – the salary level at which you pay the loans back – which means they pay more every year than they were told they would aged 18.
And now, seemingly the whole country is aware of the punitive eye-watering interest, which at times have exceeded 7 per cent and has only recently been capped at 6 per cent, a level still higher than most mortgages.
But even though the report lays all this bare, graduates need to be aware not to expect the problems to be fixed – to do so would be naive.
And the reason for this is essentially admitted in the report itself: student loans have been made unfair due to political convenience.
Any change that drastically reduces the burden on graduates will cost the Treasury, and that money will have to recouped from elsewhere if the government wants to commit to the sustainability of public finances.
That means any change in the terms of student loans will probably mean spending reductions or tax rises elsewhere.
We are on the verge of a change of government – with Andy Burnham set to replace Sir Keir Starmer later this month.
There’s pressure on Burnham to raise the repayment threshold, with think-tanks suggesting a move from £29,385 to £33,542. This would restore the real value of the threshold has it was set in 2018.
The Treasury Committee has said an unfreezing of the threshold would be the “moral” thing to do, echoing language used by personal finance expert Martin Lewis a few months ago.
But though this would be a popular move among those that pay the loans, is the public ready to accept the inevitable change that comes with fixing it?
Earlier this year, after months of news stories about the unfairness of student loans, Chancellor Rachel Reeves said that there were problems with the system, but that it wasn’t a political priority to fix it.
Her language was blunt, and perhaps misjudged, but precedence means it’s hard to see a new chancellor taking a vastly different approach.
They may not use quite so crass words, but when considering the voting bloc at play, any government seems highly unlikely to prioritise the desires of a fairly small group over the rest of the country.
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