SLTG0209
Written evidence submitted by Alexander (Sasha) Martiyanov
Introduction
I attended university between 2016 and 2019. I took out a Plan 2 student loan so this discussion around student loans and graduate taxation has personally affected me. I am very passionate about this issue and am grateful for the opportunity to provide evidence to the Treasury Committee.
My overall view is that the current system is grossly unfair. Some of the main problems with the current system include:
- Extreme interest rates that result in middle earners repaying more in interest than the amount originally borrowed and middle earners repaying even more than higher earners;
- The system contributes to inequality as the wealthiest families don’t need to take student loans but most families have no choice and must accept a student loan – and as discussed below it is effectively a graduate tax. So there is effectively a tax that the wealthiest families do not have to pay but the rest of society does;
- Terms are unilaterally changed (e.g. repayment thresholds frozen so they don’t rise with inflation) with no option to do anything about it, disproportionately affecting those from poorer backgrounds that take out the largest student loans;
- Burdening 17 / 18 year olds with huge debt, with repayments lasting for 30 years under Plan 2 and 40 years under Plan 5;
- Penalising determined young individuals that are determined to pursue an education, improve their skills and contribute to the economy; and
- Many younger people are struggling with cost of living and issues such as housing outpacing wage growth. This has a knock-on impact as it delays people being able to start families and this leads to long-term problems for society. Student loan repayments reduce young people’s earnings and make their situation more challenging.
Interest rates
1) Should a student loan incur interest?
No – there should not be student loans at all – see question 5.
1b) Should the interest on a student loan be dependent on income?
If interest is to be charged, then it is acceptable for interest to be dependent on income – this turns the student loan into more of a graduate tax. However, the change in interest rates should not lead to a situation where graduates can end up paying back more than what was borrowed – see question 2.
1c) Should the interest on a student loan be fixed to RPI, CPI, or another measure?
RPI is not a fair measure – it is consistently higher than other common measures for inflation such as CPI and CPIH. RPI has been dropped as an official national statistic (Government’s Actuary’s Department, 2021) so should not still be used for student loans.
The Office for National Statistics (2026) noted that CPIH is their lead inflation index. This seems a fairer measure as it includes representative goods and council tax. The interest rate should not be any higher than CPIH.
https://actuaries.blog.gov.uk/2021/08/23/measures-of-price-inflation-rpi-cpi-and-cpih/
2) Are interest rates above the rate of inflation on a student loan fair?
Interest on student loans should not be any more than inflation. When interest is charged higher than inflation like for Plan 2 loans, it creates a situation where many graduates will pay back substantially more than what was borrowed. The interest that was charged on Plan 2 loans for students, while they were studying at university, was RPI plus 3%. This is a very high rate. Added to this, if students earn £51,245 or more (which is only slightly above the median postgraduate salary), the interest on their loan would continue to be charged at RPI plus 3%.
This has a disproportionate effect on middle earners when compared to lower and higher earners. For example, a Plan 2 student with £50,000 debt on a 3-year course with a current pre-tax salary of £50,000 would be estimated to make total repayments of over £100,000 and the loan would still not be cleared until being written off after making payments for 30 years. This is a very common situation yet is clearly an unfair outcome.
Using a £50,000 starting debt and Plan 2 student on a 3 year course but salaries of £25,000 (lower) and £100,000 (higher) as a comparison, you see the lower income student repay under £3,000 and the higher income student repay c.£68,500, which is less than the middle earner.
When payday loans were regulated by the FCA just over 10 years ago, one of the key rules was that borrowers would never have to pay more in fees and interest than the amount borrowed – if it’s not fair for a commercial payday loan, how is it fair for a student loan when looking at those middle earners?
(Calculations using https://www.student-loan-calculator.co.uk/)
https://www.fca.org.uk/news/press-releases/fca-confirms-price-cap-rules-payday-lenders
3) Was it fair for the Government to block the interest rate on student loans from going negative when the measure of index the loan was pegged to went negative?
No – as mentioned above, interest on student loans should not be any more than inflation. Therefore, if the inflation index goes negative, so should the interest rate on student loans. Otherwise, the impact on students is that they are made worse off when factoring in inflation.
4) Should student loans be branded as loans, or as something else? Does calling a student loan a loan exacerbate the dissatisfaction with the product among its users?
The name is not the main problem. The main problem is the actual way that the student loan functions.
However, there is an issue with the terminology of calling it a ‘product’ for 3 main reasons.
The first reason is that this makes it sound like a consumer relationship where students have a choice whether they want to purchase the product or not. In reality, there isn’t a choice because if a student wants to go to university, they will almost certainly have to take out a student loan unless their parents/family can afford to pay the fees on their behalf. Few students have this privilege.
The second reason is that the topic is education. Education is a societal good and it should be treated as a right rather than a commercial investment that generates a return for the lender – the outcome of having an educated population is the goal and brings benefits to society.
The third reason is that the language shifts the burden fully on students – individual students are bearing the cost of wanting to improve their abilities and become more productive – they are being penalised for making a good choice and wanting to develop their skills to improve their communities and the country.
5) What proportion of a student’s university education should be funded by the student versus being subsidised by the state?
Student loans should be abolished. Education should be a right guaranteed by the state. Society as a whole benefits from having better educated people – educated people gain skills and so can perform certain specialised roles such as medicine, law and engineering. They perform key roles that are needed in society and everyone benefits from having educated people performing these jobs.
Also, according to the Department of Education (2025), graduates typically earn more than non-graduates (£42,000 median nominal graduate salary compared to £30,500 for non-graduates in 2024). Postgraduates’ median nominal salary was £47,000 in 2024. This shows that on average, better educated workers earn more and so they will in turn pay higher income taxes contributing financially to society.
https://explore-education-statistics.service.gov.uk/find-statistics/graduate-labour-markets/2024
Terms of loans and the Government's ability to change them
6) Should the terms of a student loan be able to be changed by government once the loan has been taken out?
The terms should only be changed to make the loan terms less onerous on students. Students have no choice but to accept whatever terms the government sets so it is unfair if the terms are unilaterally changed to make them more onerous.
In contract law, if someone unilaterally changes the terms of a contract, the other party isn’t bound by the new terms. If there is a change, especially a fundamental change such as the amount that is to be paid by a party, this needs to be agreed in order to be legally binding. Why is this practice of unilateral changes binding on student loans?
In particular, terms such as freezing the repayment thresholds are deeply unfair. This leads to more income becoming subject to repayments as earnings rise.
7) Does the process around student loans provide enough information, in a clear and fair form, given that this may be the first credit contract for many people?
I would argue that it is impossible for a 17 / 18 year old to really understand that taking out a student loan will be with them for 30 years. When you realise that this is nearly twice the length of time that they have been alive, are they really able to appreciate what this really means, especially when they are so young? The position is even more striking under Plan 5 – the loan is only written off after 40 years. Student loans have become a lifelong burden and this is not fair.
Simply setting this out in a clearer way just makes the problem easier to understand. Student loans aren’t a mis-sold financial product, most students don’t have a choice whether they accept to take out a student loan – if they want an education, they will have to sign up to whatever the terms are and however clearly or opaquely they are presented.
8) Should loans from the Student Loan Company be compliant with FCA rules and principles and the Consumer Duty?
Which FCA rules should be considered? Some (e.g. conflicts of interest, adequate protection for client assets) wouldn’t apply here as they are more commercially/private focused rather than relevant to a public context.
The FCA is generally about protecting consumers so it does not fit the student loans / education context. The FCA approach reinforces the view that students are customers rather than citizens with a right to education.
Principles like acting with integrity, treating people fairly and clear communication are positive because they can reduce the harm caused by the current system. Looking at the FCA principles and the Consumer Duty, implementing these could improve the situation but would certainly not go far enough in resolving the fundamental issues.
Also, the Consumer Duty (the principle that ‘a firm must act to deliver good outcomes for retail customers’) doesn’t make sense here – how can good outcomes be achieved in a system that imposes huge debts on young people, especially those that are less wealthy since wealthy families don’t need student loans to attend university? Can a student loan / graduate tax system ever be called a good outcome where it creates a situation, in which a significant portion of young people’s earnings is being deducted over the course of decades – when all of society benefits from education? Surely a good outcome is to enshrine the right to education and to incentivise young people wanting to develop their talents? Surely a good outcome is to encourage those that want to fulfil critical roles such as doctors, teachers and engineers without being penalised for aspiring to these jobs?
9) Does changing the terms of a government loan contract once it has been entered into erode trust in Government?
See question 6 – absolutely it erodes trust in Government unless the terms are changed to be less onerous on students.
10) Might changing the terms of a loan once it has been taken out affect future take up of student finance through lack of certainty in the loan product?
One view is that students will have to accept whatever terms are in place whether or not they are subject to change. If students want to attend university, but cannot afford to do so without a student loan, then they are forced to take out a loan.
However, this ignores students’ backgrounds. Less wealthy students are likely to be disproportionately affected – this makes the system even more unfair. This is because these students have to accept higher student loans at the outset. Therefore, since their student loan is higher, this results in these students’ having to accept a greater level of risk. Especially when these students see that even if they become middle earners and earn more than their parents and family, they will actually become part of the middle group that ends up paying the most (since higher earners clear the debt faster).
11) Are there examples of government unilaterally changing the terms and conditions of finance provided to companies or pensioners or other groups in the economy?
Some might try to compare this to a change in the pension age. A change in pension age is not the same as student loans.
The state pension is a benefit where income is being given to individuals to spend as they wish and this can reasonably be adjusted for demographic reasons – with people living longer, healthier lives, it is reasonable to extend the state pension age as there are increasing numbers of people becoming eligible. This is especially true with an aging population, the state cannot afford to provide income directly to so many people. The state pension is a public benefit afforded to everyone if they have made the sufficient years of contributions.
Student loans are taken on by individuals that are looking to gain an education in order to improve their skills and productivity.
12) Should the incomes of higher-earning graduates be used to subsidise the loans of lower-earning graduates?
This is the current position in general taxation when you look at income tax rates. The idea is that those with the broadest shoulders should pay more into the system because they can afford to. However, this should not be turned into a higher-earning graduate vs lower-earning graduate debate.
Wealthy non-graduates and those that graduated many years ago rely on young people being productive in society:
- When they have health issues, they rely on a doctor who took out a student loan to fund their studies;
- When they want to purchase their home, they rely on a lawyer who took out a student loan to fund their studies.
- When they watch a TV, they rely on arts students who took out student loans to fund their studies.
Therefore, as all of society benefits, all of society should be paying for these students to have an education.
Fiscal policy
13) How does the student loan system interact with the taxation system, including marginal rates?
The student loan system effectively operates as a graduate tax. It sits as a % above a certain level of earnings and so increases the marginal rate.
However, the real unfairness is exposed when looking at how the impact is distributed and the disproportionate impact on middle earners:
- Higher earners repay the loan quickly and so do not have to pay the decades of interest like the other groups.
- Middle earners repay for the full duration of the loan and often repay the most in total (see question 2 as an example)
- Lower earners repay for the full duration of the loan but don’t repay much
Therefore, it is a graduate tax that unfairly impacts middle income earners.
Fairness
14) Do student loans currently deliver equitable shares of burdens and benefits between generations?
No. You can compare two key policies – student loans (and all their problems discussed above) with regards to younger generations and pensions with regards to older generations.
Pensioners have the triple lock pension. The pension rises by the highest of inflation, wage growth or 2.5%. This means that a pension could rise higher than workers’ earnings. The outcome of this is that the average worker that is being productive and contributing to the economy through labour is rewarded less than a pensioner receives in benefits. This is not a fair outcome of burdens and benefits. Of course, elderly need support but why is their income rising faster than the wages of productive members of society? The equitable position would be to link pensions to wage growth so that they rise equally.
April 2026