The rates will remain in force until 31 August 2027 and are based on an RPI figure of 4.1%. According to the Student Loans Company, that rate will determine the interest charged across a number of loan categories, although the way it is applied differs depending on the repayment plan held by each borrower.
Plan 2 and Plan 3 Interest Rates Will Be Capped at 6%
Borrowers with Plan 2 student loans normally face interest rates ranging from RPI to RPI plus three percentage points, depending on their circumstances. With RPI set at 4.1% for the relevant period, this would ordinarily create a range between 4.1% and 7.1%.
The government has instead placed a ceiling on the highest rate that can be charged. According to the Student Loans Company, the maximum interest rate applied to Plan 2 loans will be capped at 6% from 1 September 2026 until 31 August 2027.
The same maximum rate will apply to postgraduate borrowers with Plan 3 loans. Their standard interest formula is RPI plus three percentage points, which gives a rate of 7.1% using the RPI figure confirmed for the coming year. The Student Loans Company said the maximum Plan 3 interest rate would also be limited to 6% throughout the same period. The cap had previously been announced on 7 April 2026.
Other repayment plans will operate differently. Plan 5 undergraduate loans will carry interest equal to RPI, meaning a rate of 4.1% between September 2026 and August 2027. Plan 1 borrowers will also be charged 4.1% over that period. GB News reported that the Bank of England base rate stands at 3.75%, while the Student Loans Company confirmed that the maximum Plan 1 rate for the period will be 4.1%.
Plan 1 Repayment Threshold Will Rise While Mortgage-Style Loans Follow RPI
Separate changes are being made to the income threshold governing repayments for Plan 1 borrowers. From 6 April 2027 until 5 April 2028, the repayment threshold will increase to £28,005.
Borrowers earning below that figure will not be required to make Plan 1 repayments during that period. According to the government information reported by BirminghamLive, the new threshold will apply after the interest-rate arrangements for the 2026-27 academic year have already taken effect.
The government has also confirmed the position for older mortgage-style student loans. From 1 September 2026 until 31 August 2027, these loans will carry interest at the RPI rate of 4.1%. Their deferment threshold will be set at £44,311 for the same period. Borrowers with questions about mortgage-style loans have been directed by the government to contact their individual loan administrator.
Taken together, the confirmed figures establish different arrangements across the main student loan categories: a 6% maximum for Plans 2 and 3, a 4.1% rate for Plans 1 and 5, and the same 4.1% RPI rate for mortgage-style loans from September.
