Ministers have been accused of making a £679 million 'surplus' off graduates due to changes made to Plan 2 student loans.

The National Union of Students (NUS) said the Government had made a 'calculated choice' to generate a 'profit' from the latest cohort.

The revelation is contained in a report commissioned by the NUS and the Higher Education Policy Institute (Hepi) think tank.

It shows that students starting undergraduate degrees in 2022/23 – the last of those on Plan 2 – will generate revenue for the Treasury rather than drain it.

This is due partly to controversial changes to the terms of the loans introduced by Labour last year, as well as changes made in 2022 under the then Tory Government.

It comes amid mounting pressure on Keir Starmer to make Plan 2 terms less punishing, as graduates say their interest is piling up faster than they can repay it.

NUS president Amira Campbell said: 'Successive governments have made a calculated choice – to profit off young people who were told university was the best option.

'Quite simply the Government should not be profiting from our debt.

'These past few months, we've seen a reckoning that young people will not stand by while politicians play with our debt and change the terms of a loan we signed before we could vote.'

The research, by London Economics, found that for 2022/23 starters, changes to terms since 2022 will save the Treasury more than £5 billion compared to the system beforehand.

This includes Labour's decision last year to freeze for three years the salary threshold after which repayments start to be made, at £29,385, instead of allowing it to rise with inflation.

It means more graduates will start making repayments earlier, generating £1.3 billion more for the Treasury.

It followed a previous freeze on the threshold introduced in 2022, which generated an extra £4.6 billion.

Together, all the changes mean graduates from the 2022/23 entry cohort earning £40,000 or above will repay £740 more in 2032 than under the previous terms.

Over their lifetimes, male graduates will pay on average an extra £13,400 compared to the original terms, and female graduates will pay an extra £16,900.

Plan 2 loans – taken out between 2012 and 2023 – charge interest of RPI plus up to 3 per cent, depending on how much a graduate earns, meaning the current maximum is 6.2 per cent.

Graduates pay 9 per cent of everything they earn over the salary threshold, with all balances cancelled after 30 years.

The NUS and Hepi want an alternative system which reduces repayments to between three and seven percent of earnings, depending on income.

They said it would be 'close to cost-neutral for the Government'.

A Government spokesman said: 'We inherited the student loans system, including Plan 2, which was devised by the previous government.

'This Government has increased the repayment threshold for Plan 2 loans twice in the past two years – the first increases since 2021 – and we heavily subsidise the student finance system, a deliberate investment in our young people and the economy.'

The Government has recently announced interest on Plan 2 loans will be capped at 6 per cent from September to protect graduates from rising inflation during the war in Iran.