UK Caps Student Loan Interest Rates at 6%

The UK Department for Education has announced new interest rates and repayment thresholds for student loans for the 2026-27 academic year, including a 6 per cent cap on interest rates for Plan 2 and Plan 3 loans.

The Student Loans Company made the announcement on Monday, August 10, 2026, confirming that the new rates will apply from September 1, 2026, to August 31, 2027.

“The applicable Retail Price Index (RPI rate) is 4.1% for the period 1 September 2026 to 31 August 2027,” the Student Loans Company said.

For Plan 1 undergraduate loans, it said: “The interest rate for Plan 1 income-contingent repayment student loans is RPI (4.1%) or the Bank Base Rate + 1% (currently 4.75%), whichever is lower.”

It added: “The maximum interest rate on Plan 1 Income Contingent Repayment Loans during the period 1 September 2026 until 31 August 2027 will be 4.1%.”

The repayment threshold for Plan 1 loans will also increase to £28,005 from April 6, 2027, to April 5, 2028.

For Plan 2 undergraduate loans, the Student Loans Company said interest rates would “vary between RPI (4.1%) and RPI +3% (7.1%) depending on your circumstances.”

However, it confirmed that “the maximum interest rate applied to plan 2 loans will be capped at 6% between 1 September 2026 to 31 August 2027.”

The cap will also apply to Plan 3 postgraduate loans.

“The interest rate for Plan 3 is RPI + 3% (7.1%),” the statement said, adding that “the maximum interest rate applied to plan 3 loans will be capped at 6% between 1 September 2026 to 31 August 2027.”

For Plan 5 undergraduate loans, the interest rate will be 4.1 per cent.

“The interest rate for Plan 5 is RPI (4.1%),” the Student Loans Company said.

The announcement also covered Mortgage Style Loans, for which the interest rate will be 4.1 per cent from September 1, 2026, to August 31, 2027.

“The deferment threshold for mortgage style loans to apply from 1 September 2026 until 31 August 2027 will be £44,311,” it said.

The Student Loans Company advised borrowers to continue monitoring its website because “the rates may change during the academic year.”