UK Caps Student Loan Interest Rates at 6% for 2026-27

The UK government has confirmed that interest rates on Plan 2 and Plan 3 student loans in England and Wales will be capped at 6% for the 2026-27 academic year, preventing a planned increase to 7.1%. The cap, which runs from September 1, 2026, to August 31, 2027, was announced by the Department for Education following its annual review of student loan terms.

The decision stems from the March 2026 Retail Price Index (RPI) figure, which rose to 4.1%. Under the standard formula for these plans, this would have triggered a maximum interest rate of 7.1% (RPI plus 3%). However, the government's previously announced ceiling of 6% will now apply, limiting the top rate for both Plan 2, which covers many undergraduate loans from the post-2012 system, and Plan 3, which applies to postgraduate loans.

The cap does not set a flat 6% rate for all borrowers. For Plan 2 loans, interest rates are income-contingent, ranging from the base RPI of 4.1% up to the capped maximum of 6%. This means graduates at the lower end of the income scale will still pay a lower rate. The current maximum rate for Plan 2 loans is 6.2%. For Plan 3 postgraduate loans, which charge a flat RPI plus 3%, the cap reduces the...