Student Loans Interest Rates and Repayment Threshold Announcement
The UK Department for Education announced 2026-27 student loan interest rates and repayment thresholds, based on a Retail Price Index of 4.1%, with caps on certain plans.
The Department for Education confirmed annual updates to student loan interest rates and repayment thresholds for the 2026-27 financial year. Interest rates for undergraduate and postgraduate Income Contingent Student Loans will be set at the Retail Price Index (RPI) of 4.1%, or the Bank Base Rate plus 1%, whichever is lower. The maximum interest rate for Plan 1 loans is capped at 4.1% for the period.
Repayment thresholds for Plan 1 loans will increase to £28,005 from April 2027, meaning borrowers will only start repayments once earnings exceed this amount. This adjustment applies to the 2027-28 tax year. The threshold change aims to reflect inflation and reduce the burden on lower earners.
Interest rates for Plan 2 loans will range between RPI (4.1%) and RPI +3% (7.1%), but are capped at a maximum of 6% for the 2026-27 period. Plan 5 loans will carry an interest rate of RPI (4.1%), while Plan 3 loans will have an interest rate of RPI +3% (7.1%), also capped at 6%. These caps are designed to limit the impact of rising inflation on borrowers.
For Mortgage Style Student Loans, the interest rate will be set at RPI (4.1%) from September 2026, with a deferment threshold of £44,311. Borrowers with these loans should contact their loan administrator for specific queries regarding repayment or deferment options.