The Department for Education has confirmed its annual updates to interest rates and repayment thresholds for student loans, with RPI rising to 4.1% from September 1
The government has announced what could be a significant shift for students and graduates, as they look to alter the repayment threshold and interest rates placed on student loans. The announcement comes after the Department for Education confirmed its yearly updates to interest rates and repayments threshold for the controversial loans, which have risen dramatically over the last few decades.
The department has updated the repayment threshold for Plan 1 loans, which are set to climb to £28,005 from April 6, 2027 to April 5, 2028, having previously been £26,900. This means that graduates will have to earn more before they start repaying what they borrowed.
Everyone on Plans 1, 2, 3 or 5 will initially have more interest added to their balance, but only borrowers who eventually repay their loans in full are likely to actually pay more.
From 1 September 2026, the Plan 1 interest rate will be 4.1%. It could fall if the Bank of England cuts its base rate sufficiently, but it cannot exceed 4.1% during this period.
For Plan 2 loans, from 1 September 2026 to 31 August 2027, borrowers will pay somewhere between 4.1% and 6%, depending on their income and circumstances.
For example, if you owed £50,000 for a full year, at At 4.1%, about £2,050 interest would be added and at 6%, about £3,000 would be added.
From September, Plan 3 student-loan interest will fall from 6.2% to 6% because of a government cap. The Plan 5 interest rate will rise from 3.2% to 4.1%, meaning that debt could grow at a faster rate.
The announcement recommends that those impacted “monitor this website regularly as the rates may change during the academic year.”
From September 1, interest on mortgage-style student loans will be 4.1%. Borrowers earning less than £44,311 may be able to defer repayments and should contact their loan administrator with any questions.
Your student loan plan is usually decided by where you lived and when you started university.
Plans 1, 2, 4 and 5 cover undergraduate loans, while Plan 3 is used by those taking out postgraduate loans.
You only have to make compulsory repayments once how much you earn passes your plan’s threshold, with a percentage deducted from earnings above it. Interest is added to your outstanding balance, but it does not directly change monthly deductions. If your income falls below the threshold, repayments stop.