UK Government Limits Student Loan Interest to 6 Percent for 2026-27

In a move aimed at offering relief to students, the UK Department for Education has unveiled new interest rates and repayment thresholds for student loans. According to an announcement by the Student Loans Company on August 10, 2026, these new rates will be effective from September 1, 2026, to August 31, 2027. The company stated that the applicable Retail Price Index (RPI) rate for this period is 4.1%. For undergraduate students on Plan 1 loans, the interest rate will be the RPI rate of 4.1% or the Bank Base Rate plus 1%, which is currently 4.75%, whichever is lower. Additionally, the maximum interest rate for Plan 1 Income Contingent Repayment Loans will be capped at 4.1% during the specified period. The repayment threshold for Plan 1 loans is also set to increase to £28,005 from April 6, 2027, to April 5, 2028. For Plan 2 undergraduate loans, interest rates will vary between the RPI rate of 4.1% and RPI plus 3%, which equals 7.1%, depending on individual circumstances. However, the Student Loans Company confirmed that the maximum interest rate applied to Plan 2 loans will be capped at 6% between September 1, 2026, and August 31, 2027. This cap will also apply to Plan 3 postgraduate loans, with an interest rate of RPI plus 3%, or 7.1%. The interest rate for Plan 5 undergraduate loans will be 4.1%. Furthermore, the interest rate for Mortgage Style Loans will be 4.1% from September 1, 2026, to August 31, 2027, with a deferment threshold of £44,311. The Student Loans Company advised borrowers to continue monitoring its website for any potential changes in the rates during the academic year.