More than 120 MPs and peers have written to Chancellor John Healey calling for an urgent review of the student loan repayment system, arguing it places an “unsustainable burden” on graduates.

The cross-party letter highlights concerns that frozen repayment thresholds, rising interest rates and ongoing deductions mean many graduates see pay rises eroded by repayments, tax and National Insurance.

Debate has focused on Plan 2 loans in England, introduced in 2012 for most undergraduates. Graduates repay 9% of earnings above a set threshold, with interest linked to RPI plus up to 3%, and balances written off after 30 years. Critics say frozen thresholds between 2027 and 2030 will increase repayments for lower and middle earners.

The intervention follows a Treasury Committee report questioning whether government communications have fully explained the long-term cost and likelihood of repayment to prospective students.

The Department for Education said it recognises concerns about the system and is considering its response to the Committee’s recommendations.