UK Caps Student Loan Interest Rates at Six Per Cent

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% cap on interest rates for Plan 2 and Plan 3 loans.

The Student Loans Company said the new rates will apply from September 1, 2026, to August 31, 2027, with the applicable Retail Price Index set at 4.1%.

For Plan 1 undergraduate loans, the maximum interest rate will be 4.1%, while the repayment threshold will increase to £28,005 from April 6, 2027.

Plan 2 undergraduate loans will ordinarily attract interest ranging from 4.1% to 7.1%, depending on the borrower's circumstances. However, the maximum rate has been capped at 6% for the 2026-27 academic year.

The 6% cap will also apply to Plan 3 postgraduate loans, which would otherwise carry an interest rate of 7.1%.

Meanwhile, Plan 5 undergraduate loans and Mortgage Style Loans will attract an interest rate of 4.1% during the period.

The Student Loans Company advised borrowers to continue monitoring its updates, noting that the rates may change during the academic year.