Committee publication · Engagement document · 27 May 2026
Summary of the Committee's 'Student loans and taxation of graduates' written questionnaire responses, May 2026
From: Treasury Committee
Summary
This Treasury Committee document summarises 50,000 responses to a written questionnaire on student loans and graduate taxation. Respondents overwhelmingly report that RPI+3% interest rates, frozen repayment thresholds, and combined tax-and-loan deductions create effective marginal tax rates of 50–77% for middle-income graduates. The system is characterised as regressive, mis-sold, and damaging to housing affordability, savings, mental health, and life decisions. Public-sector workers and women with career breaks are disproportionately affected.
Key findings
- Borrowers report balances rising despite regular repayments; typical initial debts of £30k–£60k have grown to £50k–£120k+, with annual interest often exceeding annual repayments.
- Frozen repayment thresholds from 2027 are widely seen as a breach of original loan terms and operate as fiscal drag; many now repay at or near minimum wage, contradicting assurances.
- Effective marginal tax rates of 50–77% (combining 40% income tax, 2% NI, 9% student loan, and 6% postgraduate loan) drive behavioural responses: turning down promotions, reducing hours, and emigration.
- System is regressive: graduates with parental upfront payment avoid interest and lifetime repayment drag, while poorer peers pay significantly more for identical salaries, entrenching class inequality.
- Student loan deductions reduce mortgage affordability by up to £100k, delay home ownership, crowd out savings and pensions, and interact with housing and cost-of-living pressures to affect family formation and career choices.
- Respondents report widespread mis-selling: loans were described as 'like a phone contract', 'not real debt', and unlikely to affect mortgages; retrospective changes to terms are compared to unlawful FCA-regulated product practices.
- Teachers, nurses, and other public-sector workers report lifelong debt despite capped pay; women are disproportionately affected by interest accrual during maternity leave, effectively widening the gender pay gap.
Tone
CriticalTopics
Key actors
Treasury Committee, Student Loans Company, Teachers, Nurses, Doctors, Social workers, Graduates (50,000 respondents)
Notable line
“It's fundamentally unfair that students with wealthy parents can be bought out of paying interest on their tuition fees entirely.”
Key Quotes
“Interest rates are extortionate and make it impossible for a large number of us to ever repay our student loan, leaving us with what is essentially an additional form of tax to pay on our earnings each month for years to come.”
“Disgusting that interest accrues from day 1 taking out your loan - should start after graduation when you are in a position to start paying back.”
“Freezing the threshold after the loan was issued means that, as salaries increase through normal progression or inflation, a growing share of income becomes subject to the 9% repayment. In practice this operates as fiscal drag or a stealth tax on graduates.”
“Right now earning £110,000, I am effectively in a 71% tax bracket (40% tax, losing personal allowance, 9% student loan and 2% NI). How is this fair?”
“If I am on the same salary doing the same job as a wealthy graduate who paid upfront, I will pay far more for far longer compared to them. This means that my parents ' circumstances have a profound effect on my debt and availability of money.”
“I was told it would not affect my ability to get a mortgage, when in fact I was refused a mortgage on affordability grounds due to my student loan.”
“I would be well within my rights to pursue legal action if any other institution had retrospectively changed the terms of loan.”
“I am a primary school teacher and my repayments don't even cover the interest added to the loan. It is an essential service and one that will not pay enough to be able to clear the debt however.”
Source · parliament.uk record ↗