A CROSS-PARTY group of MPs launched a formal inquiry into student loan repayments, asking graduates across Britain to share their experiences of a system that has come under growing criticism for its punishing interest rates and rising debt burdens.
The Treasury select committee announced it would gather evidence from borrowers and examine whether the terms of student loans are "reasonable and proportionate", reported the Times.
Dame Meg Hillier, the Labour MP who chairs the committee, said high interest rates and marginal tax rates had "clearly led to widespread dissatisfaction among graduates who may not have fully understood their repayment terms and the possibility that they could change."
"This inquiry is about fairness," she said. "Fundamentally, what we're asking is, have the goalposts been moved in a way which is unfair to graduates?"
The inquiry comes amid mounting concern about the financial burden carried by millions of graduates. Those with undergraduate loans who earn more than £50,270 face an effective marginal tax rate of 51 per cent once student loan repayments and national insurance contributions are taken into account.
Under the current system, graduates must repay nine per cent of their income above a set threshold from the April after they finish their studies. Those who also took out postgraduate loans repay an additional six per cent on top of that, as well as paying income tax and national insurance.
Repayment thresholds range from £25,000 to £32,745 depending on when and where the borrower studied.
A further source of anger is the government's decision, announced in last November's budget, to freeze repayment thresholds until 2030. The Institute for Fiscal Studies estimates this will cost graduates at least £260 more each year by 2029.
The committee will also examine whether loans should carry any interest at all, whether interest should be linked to a graduate's income, and whether using the retail prices index, a measure of inflation that was deemed too inaccurate and replaced by the Office for National Statistics in 2013, remains appropriate.
Chancellor Rachel Reeves, who appeared before the committee on Wednesday (11), said any changes to the system would need to be "fully costed and fully funded" and that the government had competing spending priorities.
She said she was focused on bringing down inflation, which would in turn reduce the interest charged on student loans.
Amira Campbell, president of the National Union of Students, welcomed the inquiry, saying: "No graduate should be financially penalised by retroactive changes to contracts that they signed when they were 17. Repayment thresholds should be fair and should increase with inflation, and interest rates should not feel like a psychological burden on low and middle-earning graduates."
The government said it had inherited the student loan system from the previous administration, adding that threshold freezes had been introduced "to protect taxpayers and students now, alongside future generations of learners and workers."
Graduates and anyone over the age of 16 can submit evidence to the inquiry online until April 14.
