The Treasury has refused to rule out unfreezing the earnings threshold for university graduates, stating that all elements of the student finance system remain under review.
Ministers have also agreed to explicitly clarify that loan conditions can be altered by future administrations, after the Commons Treasury Committee warned that previous presentation of the loans amounted to mis-selling.
The Government has faced criticism over its management of repayment conditions, particularly regarding "plan 2" loans issued in England between 1 September 2012 and 31 July 2023.
During last October’s budget, former chancellor Rachel Reeves froze the income threshold for loan repayments for three years starting in 2027.
This leaves borrowers financially worse off, as the threshold would otherwise have adjusted upwards with inflation.
When introduced in 2010, the plan 2 repayment threshold was intended to rise annually alongside inflation, but it has been frozen multiple times since 2016.
In a report published in July, the Treasury Committee called on ministers to reverse the freeze in the upcoming autumn budget.
In its response, the Government acknowledged the cost-of-living pressures facing graduates and noted it "understands concerns" over repayment terms.
"We keep all aspects of the student finance system under review," it stated.
"Decisions on student loan repayment arrangements must be considered alongside wider fiscal priorities, the long-term sustainability of the higher education funding system, and the need to ensure value for money for taxpayers.
"Any significant changes require careful consideration of their impacts on borrowers, taxpayers and public finances.
"The Government will continue to consider opportunities to ensure the fairness of the student finance system for borrowers, taxpayers and public finances."
Chair of the Treasury Committee Dame Meg Hillier called on the Chancellor to use the upcoming budget to "give graduates some much-needed breathing space".
The Government also accepted that "more can be done" to support borrowers, confirming updated guidance will make it "more prominent" that regulations can be changed by Parliament.
Sir Philip Augar, chairman of the Augar review into higher education funding, told the committee during its inquiry that successive governments altered loan terms in an "almost sneaky way".
He told MPs: "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."
Following the response, Dame Meg 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.
"Importantly, the Treasury has not ruled out reversing the threshold freeze but instead says the whole student finance system is under review.
"I recognise that finances are tight but I continue to urge the Chancellor to look at this again. I sincerely hope he will use his upcoming budget to give graduates some much-needed breathing space."
Interest on plan 2 loans is charged at the retail price index (RPI) inflation rate plus up to 3%, depending on graduate earnings.
The interest rate has been capped at 6% since September to protect borrowers from inflation driven by the war in Iran.
Many graduates report that despite years of regular payments, their overall debt has either grown or stagnated due to inflation.
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