Government student loans are “illegal” and “unenforceable”, a top lawyer has said, arguing that graduates must be reimbursed for signing misleading contracts at extortionate interest rates.

Students graduating from university this year face rates of 4.6 per cent on government loans, which cover tuition fees, living costs and repayable grants.

Concerns have been raised about the soaring cost of the loans, which could leave graduates paying out more than £100,000 – double the amount initially borrowed - according to independent analysts.

But Estelle Clarke, a former City lawyer and fair loans campaigner, has argued that the government loans are sold deceptively, tying students into contracts with rates that are closer to 6.6 per cent.

This is because the 4.6 per cent rate cited is compounded monthly, meaning every month unpaid charges are added on to the original loan.

“Extortionate funding costs and unfair terms are forced upon students in unknown ‘agreements’ which break the law,” she said. “If students ask to negotiate, they meet a brick wall.”

Writing for The Independent, Ms Clarke argued that the recent High Court ruling on Brexit could in fact provide hope for campaigners against “exploitative” student loans, due to old and highly specialised laws of Equity that protect consumers from “unconscionable” agreements.

Ms Clarke said: “Students are being taken for a ride with their student financing. In the UK, laws of Equity protect people from being exploited by “unconscionable” agreements like these.

Student news in pictures Show all 34 1 /34 Student news in pictures Student news in pictures South Korean policemen detain a student demonstrator during a protest against South Korean President Park Geun-Hye EPA Student news in pictures South Korean policemen detain student protestors during a protest against South Korean President Park Geun-Hye outside the National Assembly in Seoul, South Korea. The protesters demanded that the parliament takes steps to impeach President Park Geun-Hye EPA Student news in pictures Filipino demonstrators face off with anti-riot police during a protest near the US Embassy in Manila, Philippine EPA Student news in pictures Hundreds of protesters including Indigenous People, students and militant groups marched towards the US Embassy to protest against the presence of US military troops and condemning the violent dispersal which left at least forty people hurt including twenty police officers and three people who were run over by a police van EPA Student news in pictures A federal judge in Mexico has ordered that a once-fugitive police chief be held on charges of kidnapping in the disappearance of 43 students Student news in pictures A man holds up a photograph of a missing student with a caption reading 'We are missing 43,' during a meeting marking the 25-month anniversary of the disappearances of 43 students in the southern state of Guerrero, in Mexico City. A federal judge in Mexico has ordered that a once-fugitive police chief be held on charges of kidnapping in the disappearance of 43 students AP Student news in pictures Miguel Perez, an intern student from the University of Puerto Rico School of Medicine, puts away his cell phone before walking into the operating room at the Dr. Isaac Gonzalez MartÌnez Oncological Hospital in San Juan, Puerto Rico. Once they complete their general surgery training, many residents are moving to the United States in search of better wages, one of the main factors linked to the current shortage of specialists in the Island Student news in pictures Fewer EU students have applied to start university courses in the UK next autumn. There was a 9% fall in the numbers who had applied for courses, according to admissions service UCAS. PA wire Student news in pictures University students protest against President Nicolas Maduro, in Caracas, Venezuela. 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The club encouraged students to buy a cookie and talk about the disastrous policy that is affirmative action Student news in pictures Donald Parish Jr, right, confronts Electrical and Computer Engineering senior Dewayne Perry over a controversial bake sale on The University of Texas campus in Austin, Texas. The Young Conservatives of Texas chapter at the University of Texas-Austin sparked the protest with an affirmative action bake sale. 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A Japanese court ordered municipalities to pay $13.7 million dollars to families of school children who were swept away to their deaths by the 2011 tsunami Getty Student news in pictures A group of student at Ewha Womans University calls for a thorough investigation into those involved in years of engagement with state affairs backstage by Choi Soon-sil, a personal confidante of South Korean President Park Geun-hye, at the school's front gate in Seoul, South Korea EPA Student news in pictures Students raise placards during a strike action called by the student union, in Madrid against university entry exams Getty Student news in pictures Libyans throw a newly graduated student into a fountain as they celebrate during the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi Getty Student news in pictures Libyans celebrate as they attend the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi Getty Student news in pictures Libyans celebrate as they attend the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi Getty Student news in pictures Thousands of Thai Catholic students take part in mourning tributes and in singing the Thai Royal Anthem to honour late Thai King Bhumibol Adulyadej at Saint Dominic School in Bangkok, Thailand EPA Student news in pictures Students of Silpakorn University paint portraits of the late Thai King Bhumibol Adulyadej at the university campus in Bangkok Getty Student news in pictures A student of Silpakorn University paints a portrait of the late Thai King Bhumibol Adulyadej at the university campus in Bangkok Getty Student news in pictures St Andrews University students take part in a foam fight known as Raisin Monday in the Lower College Lawn behind St Salvator's Quadrangle following the Raisin Weekend PA wire Student news in pictures St Andrews University students take part in a foam fight known as Raisin Monday in the Lower College Lawn behind St Salvator's Quadrangle following the Raisin Weekend, an annual tradition where student 'parents' inflict tasks on the unfortunate first-years they have adopted as 'children' as part of a mentoring scheme PA wire Student news in pictures Students at the Cuba's National Ballet School (ENB) in Havana, Cuba Reuters Student news in pictures Students at the Cuba's National Ballet School (ENB) take part in a practice in Havana, Cuba Reuters Student news in pictures Students at the Cuba's National Ballet School (ENB) wait in line to enter a classroom in Havana, Cuba Reuters

"The recent Article 50 Judgment restated Equity’s priority and government’s acceptance of this.

“Students also have legislative protection from ‘extortionate credit bargains’,” she explained, “which loans have become. That is why student loans are no longer legal, in whole or in part.”

Students in England are said to leave university faced with some of the highest debts the world – owing significantly more than their US, Australian and Canadian peers.

“When introduced in 1998, government student loans were relatively fair,” said Ms Clarke. “Since then, they have changed so much they have become illegal: tested in court, they’d be ruled unenforceable.

“On top of this, hidden amongst students’ expenses is a hefty portion of investor profit: student loans are lining the pockets of third party fat cats,” said Ms Clarke.

High Court rules Government cannot trigger Article 50 without parliamentary approval

“Impoverished students use their loans to pay returns to the wealthy, at ruinous cost, without even knowing they are doing so.”

Last year Simon Crowther, a civil engineering student at Nottingham University, made headlines for contesting the legality of his student loan in an open letter to his MP.

He was in the first wave of students faced with £9,000 tuition fees and prompted a number of similar complaints from students who claim they were mis-sold their loans.

“The government needs to act before it has a national scandal on its hands,” Ms Clarke added, “Theresa May must repay students the amounts they overpaid David Cameron’s government.

“Student loans should have interest removed or charges capped at 1.25 per cent, not compounding. Loan agreements should be given to students so they know what they are signing.

“When such reforms are done and investor profit stops being students’ responsibility, student loans will start being legal.”

Last month it was revealed that more than 300,000 graduates had received refunds from the government-owned Student Loans Company after being wrongly overcharged in their loan repayments.

A spokesperson for the Department for Education said: “Interest rates are linked to RPI to ensure that student funding remains sustainable in the long term. There is extensive information and support to help borrowers understand the loan terms, and they must sign a declaration that they have done so.

“As the OECD has recognised, our student funding system is sustainable with a relatively high threshold before borrowers have to repay their loan.