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One of Britain’s most trusted financial experts has blasted Labour for not ending the “immoral” freeze in the point at which student loans are repaid. Martin Lewis, founder of MoneySavingExpert.com, is dismayed at the Government’s response to a cross-party call for it to reverse the freeze in the threshold.

The Treasury select committee had told the Government it had a “moral obligation” to reverse the freeze which means graduates with “plan two” loans will pay back 9% of their earnings above the threshold which will be held at £29,385 from 2027 to 2030 instead of rising with inflation. The Government has committed to improving guidance to students before they take out loans but Mr Lewis is unimpressed.

Warning of a “student loan crisis”, he said: “This is a very disappointing response that does little to help the millions of students already struggling with student loans, after years of degradation of the terms they signed up to, by successive governments. Most urgently, it doesn’t address the coming immoral freeze of the plan two repayment threshold, announced by Rachel Reeves, due to start next April.

“That will mean all those on plan two loans will effectively pay more each year. I say it’s immoral because it is a negative retrospective change of terms to loan contracts [that] students, often aged 18, signed up to. No commercial firm would ever be allowed to do that.”

Mr Lewis wants Chancellor John Healey to reverse the freeze in the upcoming Budget.

He said: “The only slim hope is that as the freeze was announced in a Budget, it has to be undone in a Budget and therefore they are just waiting for the coming one to do that.”

Mr Lewis added: “The Government has also rejected shifting the inflation link from RPI to CPI – continuing the unfair pattern that means when the Government raises our costs by inflation it’s often via the higher RPI, but on things where it pays out it’s often linked to the lower CPI measure.”

Setting out the action he wants to see, he said: “The repayment threshold needs to rise, interest needs to fall, maintenance support needs uprating and the whole system needs a fundamental reset.”

In its response to the Treasury committee report, the Government does not give rule out ending the threshold freeze but says it will “keep all aspects of the student finance system under review.”

Dame Meg Hillier, who chairs the committee, said: “The commitment to right a historical wrong by updating the information so that prospective students are properly informed before taking out a massive loan is an important step forward. Unfortunately, though, it doesn’t help graduates who are angry that they didn’t receive the same service and are now facing punitive repayment terms on a loan which keeps growing.

“And they are juggling that stress with other huge pressures like trying to get on the housing ladder and save for a pension. I say it again, we must give young people a fair chance…

“I sincerely hope [the Chancellor] will use his upcoming Budget to give graduates some much-needed breathing space.”