UK caps student loan interest rates at six per cent

The UK Department for Education has set a maximum interest rate of 6% for student loans under Plan 2 and Plan 3 for the academic year 2026-27. The Student Loans Company announced these rates on Monday, August 10, 2026, with repayment periods extending from September 1, 2026, to August 31, 2027. For Plan 1 undergraduate loans, the interest rate is capped at the lower of RPI (4.1%) or the Bank Base Rate + 1% (currently 4.75%).

The repayment threshold for Plan 1 loans will rise to £28,005 from April 6, 2027, to April 5, 2028. Plan 2 undergraduate loans will have interest rates ranging from RPI (4.1%) to RPI +3% (7.1%), but the maximum interest rate for these loans will also be capped at 6% during the specified period. Similarly, Plan 3 postgraduate loans will have a capped interest rate of 6% during the same period.

For Plan 5 undergraduate loans, the interest rate will remain at 4.1%. Mortgage Style Loans will have an interest rate of 4.1% during the same timeframe. Borrowers are advised to monitor the Student Loans Company's website for any potential changes to the rates during the academic year.