UK Government Refuses to Reverse Student Loan Repayment Freeze, Promises Clearer Warnings Instead

The UK government said Sunday it will give future university applicants clearer warnings about how student loans work, but it stopped short of fixing the repayment freeze that's already squeezing millions of current graduates.

HM Treasury and the Department for Education jointly responded to the Commons Treasury Committee's July report, titled "Student loans: Broken and unfair?" according to MoneySavingExpert. The committee, chaired by Meg Hillier, had concluded that some loan promotional material amounted to mis-selling. That finding followed BBC reporting that the DfE had compared student loan repayments to £30-a-month phone contracts in materials shown to teenagers.

Going forward, ministers say new applicants will be told plainly that repayment rules can be changed by future governments and Parliament, and that career choices, salary progression, part-time work, and career breaks all affect how much they'll ultimately repay, according to the BBC. The government rejected giving students long-term repayment predictions, arguing those projections would be "misleading" given their limited accuracy.

The freeze at the center of the fight

The dispute traces back to a November 2025 announcement by Chancellor Rachel Reeves that the repayment threshold for Plan 2 loans in England would be frozen at £29,385 starting April 2027, staying flat for three years, according to the Guardian. The threshold currently sits at £28,470. Plan 2 loans, issued in England between September 2012 and July 2023 and still issued in Wales, carry interest at the Retail Prices Index measure of inflation plus up to 3%, with borrowers repaying 9% of everything earned above the threshold. Balances are written off after 30 years.

Freezing the threshold instead of letting it rise with inflation means graduates start repaying sooner and pay more over time. The committee argued the government had a "moral obligation" to reverse that freeze to preserve trust in the terms graduates originally signed up for.

The government's response acknowledged the difficulties graduates face but made no commitment either way, saying only that it "keeps all aspects of the student finance system under review," according to both the BBC and the Guardian.

Martin Lewis says it doesn't touch the real problem

Martin Lewis, founder of MoneySavingExpert, who submitted evidence to the committee's inquiry, called the response "very disappointing" and said it "does little to help the millions of students already struggling with student loans." He argued the coming Plan 2 threshold freeze is a retrospective change to a contract signed by borrowers often aged 18, something he said "no commercial firm would ever be allowed to do."

Lewis noted one narrow opening: because the freeze was announced in a Budget, it likely has to be undone in a Budget, meaning the next fiscal statement from Chancellor Rachel Reeves is the venue where reversal is still possible. In August, 121 MPs and peers from across party lines wrote to Reeves urging an urgent review, arguing that frozen thresholds combined with inflation-linked interest create "historically high" effective marginal rates for young teachers, nurses, engineers and entrepreneurs, according to the Guardian.

The government also rejected extending Financial Conduct Authority Consumer Duty protections, the fairness standards that apply to commercial loans, to student loans, saying the two are "very different." Lewis pointed out he campaigned for exactly that change back in 2015 alongside then-backbencher Wes Streeting, now a Cabinet minister in the government that just rejected it. Ministers also declined to switch the interest calculation from RPI to the generally lower CPI measure.

A competing spending priority

According to Traders Union, citing the Financial Times, officials inside the Department for Education are not pushing for a threshold increase in pre-Budget talks with Reeves. Instead, attention inside government is shifting toward getting nearly a million young people classified as NEET, not in education, employment or training, into work. Alan Milburn, leading a government review of that group, is due to report next month and has said substantial upfront funding is needed.

Ministers are weighing a finite pot of money against two claims on it: graduates asking for relief on existing debt terms and a much larger cohort of young people with no job or training at all. Traders Union is the only outlet among these sources to surface that trade-off explicitly, while the BBC and Guardian focus mainly on the mis-selling dispute itself.

Whether that becomes the government's public justification for holding the line on the freeze, or whether Chancellor Reeves moves on it in the coming Budget as 121 lawmakers have demanded, remains unresolved. Hillier said she welcomed that a reversal hasn't been ruled out, but added she'll "continue to urge the chancellor to look at this again."