Student Loan Interest Rate 2026/27 — What to Expect
Student loan interest rates are updated every September based on the March RPI figure. The 2026/27 rate will be announced in April 2026 and take effect from September 2026. This article explains exactly how rates are calculated for each plan type, reviews the current rates, explores historical trends, and assesses whether the interest rate even matters for your specific situation.
How Student Loan Interest Rates Are Set
Every student loan plan uses the Retail Prices Index (RPI) as the foundation for setting interest rates. The specific RPI figure used is always the one published for the month of March, which the Office for National Statistics releases in mid-April. This March RPI figure then determines the interest rate from the following September through to the next August. There is no mid-year adjustment — once the rate is set in September, it remains fixed for a full 12 months regardless of what happens to inflation in the interim.
This timing means there is a significant lag in the system. If inflation spikes in October 2025, it will not affect student loan interest until September 2026 at the earliest, and only if the elevated inflation persists through to March 2026. Conversely, if inflation falls sharply, borrowers continue paying the higher rate until the following September. This lag can work in borrowers' favour or against them depending on the direction of inflation at any given time.
The March RPI figure for 2025 was 3.2%, which set the current 2025/26 interest rates. The March 2026 RPI figure will set the 2026/27 rates from September 2026. As of early 2026, most economic forecasters expect RPI to remain in the range of 2.5% to 4.0%, meaning the 2026/27 rates are likely to be broadly similar to current levels, though precise predictions are impossible until the March figure is published.
Current Interest Rates (2025/26)
Here are the interest rates currently applying to each student loan plan, effective from September 2025 through August 2026.
| Plan | Interest Rate | How It Is Calculated |
|---|---|---|
| Plan 1 | 3.2% | Lower of RPI (3.2%) or BoE base rate + 1% (4.75%) — so RPI applies |
| Plan 2 (at threshold) | 3.2% | RPI (3.2%) for income at or below £29,385 |
| Plan 2 (maximum) | 6.2% | RPI (3.2%) + 3% for income ≥ £52,885 |
| Plan 4 | 3.2% | Lower of RPI (3.2%) or BoE base rate + 1% (4.75%) — so RPI applies |
| Plan 5 | 3.2% | RPI only (3.2%) |
| Postgraduate Loan | 6.2% | RPI (3.2%) + 3% |
The most striking feature of this table is the range for Plan 2. A graduate earning £29,385 (the repayment threshold) pays 3.2% interest, while a graduate earning £52,885 or more pays 6.2% — nearly double. The rate scales linearly between these two income levels. This income-linked interest mechanism is unique to Plan 2 and was introduced to ensure that higher-earning graduates pay a greater share of the loan system's cost. For a complete explanation of the interest rate mechanics, see our guide on student loan interest rates explained.
How Each Plan's Rate Works in Detail
Plan 1 and Plan 4
Plans 1 and 4 use the same interest rate formula: the lower of RPI or the Bank of England base rate plus 1 percentage point. This dual-cap mechanism protects borrowers from excessive interest. In the current environment, with the Bank of England base rate at 3.75%, the base rate plus 1% equals 4.75%, which is higher than RPI at 3.2%, so RPI applies. This means Plan 1 and Plan 4 borrowers pay 3.2% interest.
If the base rate were to fall below 2.2% (making base rate plus 1% lower than 3.2%), then the base rate formula would kick in and the interest rate would drop below RPI. This happened during the era of ultra-low interest rates from 2009 to 2022, when Plan 1 rates fell as low as 0.9%. The dual-cap mechanism meant Plan 1 borrowers benefited significantly from the low interest rate environment, paying well below inflation on their loans for over a decade.
Plan 2
Plan 2 interest is the most complex. The rate depends on your income, with three distinct zones. At and below the repayment threshold (£29,385), you pay RPI only — currently 3.2%. Between the repayment threshold and the upper threshold (£52,885), the rate scales linearly from RPI to RPI plus 3%. At £52,885 and above, you pay the maximum rate of RPI plus 3%, currently 6.2%.
For example, if you earn £40,000, your income sits between the two thresholds, and your interest rate is approximately 3.2% plus 3% × (£40,000 − £29,385) ÷ (£52,885 − £29,385) = approximately 4.6%. At £52,885 and above, you pay the maximum rate of RPI plus 3%, currently 6.2%.
While you are studying, and for the tax year in which you graduate, you always pay the maximum rate of RPI plus 3% regardless of your income. This means interest accrues rapidly on Plan 2 loans from day one. A student borrowing £9,790 in tuition fees and maintenance loan in their first year sees 6.2% interest applied immediately. By the time they graduate three years later, significant interest has already been added to their balance before they make their first repayment. This is one reason why Plan 2 balances are so large at graduation — a student who borrows £57,000 over three years may graduate with a balance of £62,000 or more due to interest accumulated during study.
Plan 5
Plan 5 uses the same formula as Plans 1 and 4: the lower of RPI or the Bank of England base rate plus 1%. This is a significant improvement over Plan 2 for new borrowers starting from September 2023 onwards. At the current rate of 3.2%, a Plan 5 borrower pays roughly half the maximum Plan 2 rate of 6.2%. Over the life of a 40-year loan (Plan 5 has a 40-year write-off period), this lower interest rate significantly reduces the total interest accumulated on the balance.
Postgraduate Loan
Postgraduate Loans always pay RPI plus 3%, currently 6.2%. There is no income-scaling and no cap based on the Bank of England base rate. This is the least favourable interest rate of any plan type for borrowers at any income level. However, Postgraduate Loan balances are typically much smaller (maximum £13,206 for a Master's course), which limits the absolute cost of the high interest rate.
Historical Interest Rates
Student loan interest rates have varied enormously over the past decade, reflecting the volatility of RPI and Bank of England base rates. Here is a summary of key rates across plan types since 2016.
| Academic Year | Plan 1 | Plan 2 (min–max) | Postgraduate |
|---|---|---|---|
| 2016/17 | 1.25% | 1.6%–4.6% | 4.6% |
| 2017/18 | 1.25% | 1.6%–4.6% | 4.6% |
| 2018/19 | 1.75% | 3.3%–6.3% | 6.3% |
| 2019/20 | 2.4% | 2.4%–5.4% | 5.4% |
| 2020/21 | 1.1% | 2.4%–5.4% | 5.4% |
| 2021/22 | 1.5% | 1.5%–4.5% | 4.5% |
| 2022/23 | 2.75% | 4.5%–7.5% | 7.5% |
| 2023/24 | 6.25% | 7.1%–7.3% | 7.3% |
| 2024/25 | 4.3% | 4.3%–7.3% | 7.3% |
| 2025/26 | 3.2% | 3.2%–6.2% | 6.2% |
The 2023/24 academic year stands out dramatically, with Plan 1 rates spiking to 6.25% as RPI surged in the aftermath of the energy crisis. This was the highest Plan 1 rate in over a decade and caused significant concern among Plan 1 borrowers, many of whom had become accustomed to rates below 2%. The rate has since fallen back to 3.2% as inflation moderated, but the episode illustrated how volatile student loan interest can be.
Plan 2 maximum rates have been consistently high, ranging from 4.5% to 7.5% over the past decade. The minimum rate has been more variable, dropping as low as 1.5% in 2021/22 when RPI was low. For higher-earning Plan 2 borrowers, the maximum rate has been a constant burden, adding thousands of pounds to their balance each year. For those who will repay in full, this interest represents a real cost. For those who will not, it is academic — the balance is written off regardless of how much interest has been added.
Rate Predictions for 2026/27
The 2026/27 interest rates will be determined by the March 2026 RPI figure, which will be published in mid-April 2026. Based on current economic conditions and forecaster consensus, RPI in March 2026 is expected to be in the range of 2.5% to 4.0%. The Bank of England base rate is expected to be between 3.5% and 4.5% by March 2026, depending on the pace of monetary easing.
If March 2026 RPI comes in at 3.0%, the resulting rates from September 2026 would be approximately: Plan 1 at 3.0%, Plan 2 minimum at 3.0% scaling to a maximum of 6.0%, Plan 4 at 3.0%, Plan 5 at 3.0%, and Postgraduate at 6.0%. If RPI is higher at 3.5%, all rates shift up correspondingly: Plan 1 and Plan 5 at 3.5%, Plan 2 maximum at 6.5%, Postgraduate at 6.5%.
There is one scenario that could produce significantly lower rates for Plans 1, 4, and 5. If the Bank of England cuts the base rate aggressively — say to 2.0% or below — then the base rate plus 1% formula (3.0% or below) could produce a rate lower than RPI, activating the cap. This would benefit Plan 1, 4, and 5 borrowers but would not affect Plan 2 or Postgraduate borrowers, whose rates are tied directly to RPI without a base rate cap.
Why Interest Rates May Not Matter for Most Borrowers
This is perhaps the most counterintuitive aspect of UK student loans, and it is crucial to understand before you worry about interest rates. For the majority of Plan 2 borrowers — estimated at 75-80% — the interest rate is entirely irrelevant to how much they will actually repay. This is because they will never clear their balance before the 30-year write-off, regardless of the interest rate.
Consider a Plan 2 borrower with a £50,000 balance. At 7.3% interest, the balance grows rapidly, potentially reaching £80,000 or more within a decade. At 4.3% interest, the balance grows more slowly, perhaps reaching £65,000 in the same period. But if this borrower was never going to repay in full anyway — if their salary trajectory means they will still owe, say, £30,000 or £60,000 at the 30-year write-off point — then the difference between owing £30,000 and £60,000 at write-off is irrelevant. Both amounts are written off. The borrower pays exactly the same total over 30 years: 9% of their income above the threshold, every year, for 30 years. The interest rate does not change this total by a single penny.
The interest rate only matters if you cross the line from not repaying in full to repaying in full — or vice versa. If a lower interest rate means you clear your balance in year 28 instead of having it written off in year 30, then the lower rate saves you two years of repayments. Conversely, if a higher rate means you cannot quite clear your balance before write-off, it could actually save you money by converting what would have been full repayment into a partial write-off. These edge cases are precisely where using our Plan 2 calculator is valuable — it models whether you are on track to repay in full and how changes in interest rate affect that outcome.
For Plan 1 borrowers, however, interest rates genuinely matter. Since most Plan 1 borrowers repay in full, the interest rate directly determines total repayment cost. A Plan 1 borrower with a £20,000 balance paying 3.2% interest repays approximately £23,000 in total over 12-15 years. At 6.25% (the 2023/24 rate), the same borrower would repay approximately £26,000-£28,000. The difference of £3,000-£5,000 is real and significant. Plan 1 borrowers should therefore pay close attention to interest rate movements. For strategies to minimise interest cost, see our guide on whether to repay early and our guide on salary sacrifice.
The RPI vs CPI Debate
There has been longstanding criticism of the use of RPI for student loan interest, because RPI consistently runs higher than CPI (Consumer Prices Index) — typically by 0.5 to 1.5 percentage points. The UK Statistics Authority stripped RPI of its National Statistics status in 2013, deeming it a flawed measure of inflation. The government has moved most other inflation-linked instruments to CPI or CPIH, but student loan interest remains tied to RPI.
If student loan interest were linked to CPI instead of RPI, rates would be noticeably lower across all plans. Using current figures, CPI is approximately 2.0% compared to RPI at 3.2%. This would mean Plan 1 rates of 2.0% instead of 3.2%, and Plan 2 maximum rates of 5.0% instead of 6.2%. Over the lifetime of a loan, the difference compounds significantly. There have been periodic campaigns to switch student loan interest to CPI, but the government has resisted, partly because the higher RPI-linked rates reduce the long-term cost of the student loan system to the taxpayer.
Key Takeaways
- 2026/27 interest rates will be set by the March 2026 RPI figure, announced in April 2026 and effective from September 2026.
- Current rates: Plan 1 at 3.2%, Plan 2 at 3.2%–6.2%, Plan 4 at 3.2%, Plan 5 at 3.2%, Postgraduate at 6.2%.
- Rates are expected to remain broadly similar for 2026/27, with RPI forecast between 2.5% and 4.0%.
- Plan 2 interest scales with income — higher earners pay up to RPI plus 3%, while those at the threshold pay RPI only.
- Plans 1, 4, and 5 benefit from a cap: the lower of RPI or Bank of England base rate plus 1%.
- For most Plan 2 borrowers (75-80%), the interest rate is irrelevant — the balance will be written off regardless.
- For Plan 1 and Plan 4 borrowers who repay in full, the interest rate directly affects total cost.
- Historical rates have ranged from 0.9% (Plan 1 in low-inflation periods) to 7.5% (Plan 2 maximum during the 2022 inflation spike).
To understand exactly how the current interest rate affects your personal repayment trajectory, use our Plan 1, Plan 2, Plan 4, Plan 5, or Postgraduate calculators. For a complete explanation of interest mechanics, read our comprehensive guide on student loan interest rates explained. And to understand whether you should consider early repayment to reduce interest costs, see our guide on whether you should repay early.