UK Student Loan Interest Rates Set for September With 6% Cap on Plans 2 and 3 Loans

The Department for Education has confirmed that interest on Plan 2 and Plan 3 student loans in England and Wales will be capped at 6% for the 2026/27 academic year, preventing rates from rising to 7.1% from 1 September.

Without the cap, both plans would have been set at 7.1% because March's Retail Price Index (RPI) figure rose to 4.1%. The new rates will run from 1 September 2026 to 31 August 2027. The government first announced the 6% ceiling in April, then confirmed the annual rates on 10 August.

Why Plan 2 and Plan 3 Rates Are Capped at 6%

The Department for Education sets annual student loan interest using the March RPI figure before the academic year begins. March 2026 RPI was 4.1%, up from 3.2% for the current year. That rise would normally push RPI‑plus‑three rates to 7.1%.

Plan 2 covers many undergraduate loans from the post‑2012 system. Plan 3 applies to postgraduate loans. The 6% cap does not cover every plan because Plans 1 and 5 use different interest rules.

What the 6% Cap Means for Plan 2 Borrowers

Plan 2 interest ranges from RPI to RPI plus 3% after a borrower leaves study. The exact rate depends on income. With RPI at 4.1%, the uncapped range would be 4.1% to 7.1%, but the cap limits the top rate to 6%.

Students still studying on Plan 2 would normally pay RPI plus 3%. That formula also applies until the April after they leave their course. The cap keeps the rate below 6% for the coming academic year.

The cap does not set every Plan 2 borrower's rate at 6%. Graduates at the lower end of the scale can still pay less, starting at 4.1%. The current maximum Plan 2 rate is 6.2%.

Plan 3 postgraduate loans charge RPI plus 3%, which would produce a 7.1% rate from September. The government will instead limit the rate to 6% until 31 August 2027. The current postgraduate rate is 6.2%.

Interest rates do not directly change monthly repayments. Government guidance bases repayments on income, not the size of the outstanding balance. Interest adds to what borrowers owe and can affect how long repayment takes.

Repayment Thresholds and Interest Are Separate

Plan 2 borrowers currently repay 9% of income above £29,385 a year. The government has frozen that threshold at the 2026/27 level until April 2030. The freeze is separate from the September interest‑rate cap.

Postgraduate borrowers repay 6% of income above £21,000 a year. Borrowers with both a Plan 2 loan and a postgraduate loan can face both deductions once their income crosses the relevant thresholds.

Interest continues to build when a borrower earns below the repayment threshold. A smaller balance also does not reduce the required deduction while repayments remain due, because the system calculates payments from income.

A lower interest rate may therefore slow the growth of a loan balance without changing the amount deducted from a borrower's salary that month. Repayment remains tied to earnings under each plan's rules.

Other Student Loan Rates From September

Plan 5 undergraduate loans will carry a 4.1% interest rate from 1 September, matching RPI. Plan 1 loans will also have a maximum rate of 4.1% for the new academic year.

The Student Loans Company says interest rates can change during the academic year when relevant caps apply. Borrowers can check their repayment plan, balance and interest through their online student loan account.