The IFS report calculated that in the long term, the Government will foot the bill for £5.9 billion per year of unpaid student loans, which are written off after 30 years.

Paul Johnson described the repayment threshold freeze as a “clear choice and change in policy” from the Treasury, adding: “The threshold was increased in each of [the] last four years, and earnings indexation was stated policy. Student ‘loans’ are treated like taxes not loans – would not let private providers change conditions like this.”

The news came as ministers prepared to publish their long-awaited response to an official review of higher education, known as the Augar review, in the coming weeks.

Led by Sir Philip Augar, the former equities broker, the review was the first one since 1963 that the Government ordered into higher and further education.

Matt Western, Labour’s shadow universities minister, said: “We have a cost-of-living crisis made in Downing Street, and whilst No 10 is in paralysis, Rishi Sunak is raising taxes on millions of people.

“Labour has a plan to help hard-working families, including cutting VAT on energy bills, saving most households £200, paid for by a windfall tax on North Sea Oil and gas producer profits.”