A Student Loans Company announcement on 10 August 2026 reset student loan interest rates for the academic year starting this September — and confirmed a temporary cap that is keeping the biggest cohort of borrowers, Plan 2, well below where the formula would otherwise take them. Here is how each plan’s rate is actually set, and why it matters less to your monthly repayment than the headlines suggest.
The one thing that doesn’t change: your monthly repayment
Whatever your plan’s interest rate does, your PAYE or Self Assessment deduction is unaffected. You repay a fixed 9% of income above your plan’s threshold (6% above the Postgraduate Loan threshold), full stop — see the Student Loan Repayment Calculator for the current thresholds. Interest only changes how quickly the balance grows between now and the point your loan is either repaid in full or written off at the end of its term. For many Plan 2 and Plan 5 borrowers who will never clear the balance before write-off, the interest rate mostly determines how much of a graduate tax the loan effectively becomes, not what leaves your payslip.
The five interest rates for 2026-27
Rates run on an academic year, 1 September to 31 August, reset each year using March’s Retail Price Index (RPI). For 2026-27 (1 September 2026 to 31 August 2027), the applicable RPI is 4.1% — up from 3.2% the year before.
| Plan | Formula | 2026-27 rate |
|---|---|---|
| Plan 1 | Lower of RPI or Bank of England base rate + 1% | 4.1% |
| Plan 2 | RPI, rising on a sliding scale to RPI + 3% for higher earners — but capped | 4.1% to 6% (would be 4.1% to 7.1% uncapped) |
| Plan 4 (Scotland) | Same formula as Plan 1 — lower of RPI or base rate + 1% | 4.1% |
| Plan 5 | RPI only, no premium | 4.1% |
| Postgraduate Loan | RPI + 3% flat, regardless of income — but capped | 6% (would be 7.1% uncapped) |
Plan 1 and Plan 4 track whichever is lower of RPI (4.1%) or the Bank of England base rate plus one percentage point. With the base rate above 3.1% for most of 2026, RPI is the lower figure, so both plans sit at 4.1%.
Plan 5 has no income-based premium at all — it simply tracks RPI, so it is 4.1% for every Plan 5 borrower regardless of earnings.
Plan 2 is the only plan with a genuine sliding scale: RPI only while you earn at or below the lower income threshold, rising in a straight line to RPI + 3% once you cross the upper threshold, and RPI + 3% flat while still studying or if you are non-UK-based and non-repaying.
Postgraduate Loan interest is a flat RPI + 3% for every borrower, with no income-based taper — the highest standard rate of any plan.
The temporary 6% cap on Plan 2 and Postgraduate Loans
Without any cap, RPI at 4.1% would push the top of Plan 2’s sliding scale — and the flat Postgraduate Loan rate — to 7.1% from 1 September 2026. The Student Loans Company’s 10 August 2026 announcement confirmed that, as with the 2025-26 academic year, the maximum rate on both Plan 2 and Postgraduate Loans stays capped at 6% for 2026-27. This is a one-year political decision layered on top of the statutory formula, not a permanent change to how the rate is calculated — each academic year’s cap has to be confirmed separately.
This is separate from the Prevailing Market Rate (PMR) safeguard already built into the terms and conditions for Plan 2, Plan 5 and Postgraduate Loans. The PMR compares the RPI-based rate against the average rate available on a basket of comparable commercial personal loans, and caps interest at that market rate if it is lower — a protection against the statutory formula ever charging more than a typical market loan would. The 6% figure for 2026-27 is a separate, additional cap on top of this existing mechanism.
When rates actually change
Rates reset every 1 September, based on the RPI figure published for the preceding March, though HMRC and the Student Loans Company can also apply mid-year changes if the Bank of England base rate moves enough to alter which side of a “whichever is lower” formula wins (relevant to Plan 1 and Plan 4). Interest itself accrues daily and is added to your balance monthly from the date each part of your loan is paid out, right up until it is repaid in full or written off.
What this means in practice
- If you are on Plan 1, Plan 4 or Plan 5, your rate for 2026-27 is 4.1% — no action needed, it applies automatically.
- If you are on Plan 2 or a Postgraduate Loan, your maximum rate is 6% this year rather than the 7.1% the formula would otherwise produce — worth knowing if you were budgeting for the higher figure.
- None of this changes your PAYE deduction. Use the Student Loan Repayment Calculator to see your actual monthly repayment, and the Take-Home Pay Calculator to see it alongside tax, National Insurance and pension contributions.
- If you are weighing a voluntary overpayment, a higher interest rate matters more the more likely you are to clear the balance before write-off — high earners on Plan 5’s 40-year term are the group most affected by rate changes; long-term low earners on Plan 2’s 30-year term are least affected, because the balance is likely to be written off regardless of how fast it grows.