The government has confirmed annual updates to student loan interest rates and repayment thresholds, affecting borrowers across the UK. The Department for Education announced the changes on Monday, which will take effect from September 1, 2026.
New Interest Rates and RPI
The Retail Price Index (RPI) for student loans has been set at 4.1% for the period from September 1, 2026 to August 31, 2027. This figure is used as the baseline for calculating interest on various loan plans, with rates varying depending on the plan and circumstances.
Borrowers on Plan 1 loans will see interest rates set at RPI (4.1%) or the Bank Base Rate plus 1% (currently 4.75%), whichever is lower. The maximum rate for Plan 1 will be 4.1%.
Repayment Threshold Changes
The repayment threshold for Plan 1 loans will increase to £28,005 from April 6, 2027, up from the previous £26,900. This change means borrowers will need to earn more before they start repaying their loans.
For Plan 2 and Plan 3 loans, interest rates will vary between RPI (4.1%) and RPI plus 3% (7.1%), but with a cap of 6% for the period. Plan 5 loans will also have an RPI rate of 4.1%, subject to market rate caps.
Official Guidance
The Department for Education advises borrowers to regularly check its website, as rates may be adjusted during the academic year. The changes follow last year's RPI rate of 3.2%.
