Young people’s faith in student finance has been badly shaken by findings from the Treasury Committee that official promotion of loans, likening repayments to a phone contract or cinema tickets, amounted to mis-selling. One student accommodation boss warns the damage runs far deeper than clumsy communication.
The committee’s report, published this week after an inquiry that drew more than 52,000 responses, concluded that the Department for Education and the Student Loans Company misled prospective students in three respects, including by failing to make clear that the government could rewrite loan terms retrospectively.
Around 5.8 million people took out Plan 2 loans between 2012 and 2023, and Business Matters has already reported that more than half of graduates say they would not take out a student loan again, with the average graduate now leaving university with roughly £53,000 of debt.
“The latest findings point to something bigger than poor communication around student loans,” says Owen Dixon, founder of Best Student Halls. “They suggest a serious trust gap between young people and the system they are being asked to buy into.
“For years, students were encouraged to see university debt as manageable, normal and something they did not need to worry about in the same way as commercial debt. But that message looks very different when graduates are facing repayment threshold freezes, high living costs and a much more uncertain financial landscape.”
Dixon reserves particular criticism for the comparisons at the heart of the mis-selling row. “A phone contract is a short-term consumer cost. A student loan can follow someone for decades. The two are not financially or emotionally comparable, particularly given that repayment terms can change and the overall cost of university has risen so sharply.”
The Plan 2 repayment threshold, confirmed at £29,385 from April 2026 and then frozen rather than rising with inflation, has sharpened the sense of grievance. The committee has urged ministers to reverse the freeze at the next Budget.
“The Plan 2 repayment threshold freeze adds to the sense that the goalposts have moved,” Dixon explains. “When students are told not to worry too much about the debt, but later see repayment terms change, it is not surprising that confidence starts to weaken.”
For employers, none of this is an abstract campus quarrel. Graduates diverting more of their pay into repayments have less to spend, save or risk on starting a business, and the pipeline of young talent is already under strain, with nearly one million young people not in education, employment or training and entry-level vacancies at a five-year low.
“For prospective students, the question is no longer just ‘Can I get into university?’ It is increasingly ‘Can I afford the whole experience, and will the return feel worth it?’” Dixon says. “That does not mean young people are rejecting higher education. Many still see university as an important route into opportunity, independence and long-term career progression. But they are becoming much more careful about the financial trade-offs.”
His prescription is transparency. “Young people need to understand not just the headline cost of tuition, but the full cost of studying and living as a student. They also need to feel that the system is being explained honestly, without comparisons that make a long-term financial commitment sound like everyday spending.
“If confidence in higher education is to be rebuilt, students need a clearer link between what they pay, what support they receive and what university can realistically help them achieve.”
