Martin Lewis: Disappointing Government student loans pledge does very little to help the millions already struggling

Martin welcomed the "small crumbs" of progress in the Government's response (issued on Sunday 13 September), but said it should reverse next April's Plan 2 repayment threshold freeze, which MSE evidence to the committee argued breached natural justice. 'Plan 2' loans are for all English and Welsh students who started university between 2012 and 2023 (and Welsh students since then too).

Martin Lewis: 'A very disappointing response that does little to help'

See Martin's full reaction to the Government's response, posted to his Instagram on Sunday:

Students to be told in plain English that the terms of their loan can change

In its response to the Treasury Committee's report, the Government said "all information provided to borrowers should be fair, clear and unambiguous", stating that the Student Loans Company (SLC) will be working with students to improve the process and make it simpler for applicants.

In addition, the Government said it will work with the SLC to "improve clarity" around how loan terms can be changed retrospectively – something we've repeatedly called for. The Government added that there's "more to be done" to make sure students understand the exact terms and conditions of their loans.

The committee's report had said ALL Government student loan promotions should clearly state that "the future terms and conditions of your loan can be changed retrospectively by future governments." It said wording stating that "all policies are kept under review" is not clear enough.

But the Government hasn't U-turned on using this policy in practice

However, the Government has said it WILL still be able to change the terms of student loans retrospectively to make sure it can "adapt the system to changing economic circumstances".

It argued that because student loans cannot be refused, repayments are made based on earnings, and the loans are cancelled at the end of their term, they should NOT be treated like other contractual agreements, with fixed terms and conditions – a measure the committee had also recommended.

The Government will NOT overturn its 'Plan 2' repayment freeze

The committee said the Government had a "moral obligation" to overturn the freeze and "honour the terms and conditions under which those loans were sold to students", something Martin and MSE have also long campaigned for.

But the Government said that although it "recognises the cost-of-living challenges faced by many graduates", it has not yet decided to overturn that decision. Instead, it "keeps all aspects of the student finance system under review".

Other key recommendations the Government rejected

Despite committing to some change, the Government has also rejected several other of the committee's recommendations, stating that it will:

• NOT split the cost of university 50:50 with students. The committee had said the Government should be contributing more towards student loans in order to "return the balance" to a 50:50 split.
  
  While the Government has claimed its subsidy towards loans is "in

  the region of 30% to 40%", evidence seen by the committee suggested some students graduating today could end up contributing as much as 95% of the cost.
  
  In its response, the Government said it "does not accept" the recommendation to even the split as it "would carry a substantial fiscal cost".

• NOT change the way it calculates student loan interest rates. Currently, the Government uses the Retail Prices Index (RPI) measure of inflation to calculate student loan interest. RPI has been widely criticised as flawed and it usually gives a higher figure than the Consumer Prices Index (CPI), which is now the standard measure of inflation.
  
  In its report, the committee reiterated that the Government should abandon RPI and use CPI instead. The Government said that it "notes" the suggestion and will "continue to consider the appropriate treatment of inflation measures" within the student loans system.

• NOT include estimates of how much of a loan is "likely to be written off" in annual statements. The committee had asked that this be implemented so students and graduates could have "an approximate indication" of how much of their loan they'll ultimately be responsible for paying.
  

  In response, the Government said that these estimates would be "highly unlikely" to generate an accurate estimate, as they'd "require too many assumptions" about the student's future circumstances. It says it will instead "improve the current information that is provided to prospective borrowers", showing the impact of salary changes and career breaks on repayment plans, for example.

• NOT require promotional material for student loans to be compliant with the financial regulator's rules. The Government said that it has a "strong rationale" for not applying the Financial Conduct Authority's Consumer Duty, arguing that student loans are too different from other regulated products to be treated in the same way. This was something the committee had recommended.

A Government spokesperson added: "We are taking decisive action to improve the student finance system... That includes increasing maximum maintenance loans, reintroducing targeted maintenance grants to expand opportunities for people from all backgrounds, and raising the repayment threshold for Plan 2 loans for the first time since 2021."