Labour have been 'almost sneaky' to change the conditions of student loans, a former Government university tsar has said.

Sir Philip Augar said he 'shares the general outrage' over rule changes that mean graduates will pay more towards their Plan 2 loans from next year.

This is due to Chancellor Rachel Reeves freezing the income threshold after which repayments kick in – meaning it will not rise with inflation.

Over time, a larger number of graduates will be dragged into paying and those already doing so will pay more.

The Tories made the same move in 2021, freezing the threshold for four years.

By law, the Government is allowed to make retrospective changes to loan conditions - unlike commercial banks.

Graduate campaigners have heaped pressure on ministers to U-turn on the change, saying the increased repayments are an unfair burden alongside the rising cost of living.

Yesterday, Sir Philip, who chaired the 2018 Augar review into student loans, said ministers have a 'moral responsibility' not to change loan terms.

He told the Commons Treasury Committee: 'I share the general outrage.

'The Plan 2 people signed up for terms and conditions that were not properly explained, I mean it was there in the small print but really you had to be right into the small print to get this, and I think that a financial services organisation has a duty of customer care … and that really ought to apply to government in the context of loans sold, effectively, to young people making the first important financial decision of their life.'

He pointed out that many school leavers may not have been aware that conditions could change.

'There's a moral issue here,' he added.

'You shouldn't be retrospectively changing the terms in quite a complicated, almost sneaky way bit by bit.

'I don't think there were bad actors in this, but it's just each administration has made a small change. You add them all together, you compound them and you get the current distorted situation.'

He added: 'If there isn't a legal responsibility, there's a moral responsibility not to alter terms and conditions as we go along.'

The Committee is holding an inquiry into student finance, including Plan 2 loans – those taken out between 2012 and 2023.

From April 2027, the repayment threshold will be frozen for three years at £29,385, with graduates repaying 9 per cent of all earnings over this.

Any unpaid debt is wiped after 30 years.

Reflecting on the current state of the student loans system in general, Sir Philip also said he 'would not be at all surprised' if banks or private credit providers were looking at coming up with alternative loan options.

Interest on Plan 2 loans is charged at the rate of Retail Price Index (RPI) inflation plus up to 3 per cent, depending on how much a graduate earns.

The Government announced earlier this year that this interest will be capped at 6 per cent from September to protect graduates from rising inflation during the war in Iran.

A Government spokesman said: 'We recognise that some graduates have concerns about the cost of student loan repayments and understand why this is an important issue. 

'We inherited the current system and have taken steps to make it fairer – including raising the repayment threshold for the first time since 2021 and capping maximum interest rates this year to protect graduates from rising costs.'