THE government is making a surplus of £679 million from recent undergraduates in England, as “unfairness is baked” into the student loan system.

Research by London Economics has estimated that for students starting their undergraduate degrees in 2022-23, changes made to loan repayment terms since then will save the Treasury more than £5 billion compared to the system beforehand.

By 2032, graduates from the cohort earning £40,000 or more a year will be expected to repay £740 more in that year than under the original plan 2 terms that were in place less than a year before these students started their studies.

As a result of the combined changes to the plan 2 system, male graduates will pay on average an extra £13,400 over their lifetimes compared to the original terms, and female graduates will pay an extra £16,900 due to the gender pay gap.

In response, the National Union of Students (NUS) and Higher Education Policy Institute have today published an alternative model of a cost-neutral student loan system, where the net Exchequer cost of the system is close to zero, and repayments will be more manageable for graduates.

They propose a marginal repayment rate of 3 to 7 per cent, depending on earnings starting from £12,570.

Public pressure forced a Treasury committee inquiry into student loans, which has been running for the past month and closes tomorrow.

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.

“Unfairness is baked into the current student loan system, where the poorer you are, the higher debt burden you face, but 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.”

Ms Campbell said the government faces a choice “whether to keep meddling with a broken system or choose to back the young people who are trying to build their futures.”

“We hope this government, who once spoke of free tuition, will at least try to do the right thing and bring about fundamental reform of this broken student loan system,” she said.