The Department for Education (DfE) has confirmed its annual updates to interest rates and repayment thresholds for student loans, affecting all borrowers. The changes, announced on August 10, 2026, set the new Retail Price Index (RPI) rate at 4.1% for the period starting September 1, 2026. This rate is used as the baseline for calculating interest on most student loan plans.
Key Changes for Different Loan Plans
For Plan 1 loans, the interest rate will be either RPI (4.1%) or the Bank Base Rate plus 1% (currently 4.75%), whichever is lower, capped at 4.1% for the period September 1, 2026 to August 31, 2027. The repayment threshold for Plan 1 loans will rise to £28,005 from April 6, 2027, up from £26,900.
Plan 2 loans will see interest rates vary between RPI (4.1%) and RPI plus 3% (7.1%), depending on individual circumstances, with a maximum cap of 6% for the same period. Plan 3 loans, which apply to postgraduate loans, will have an interest rate of RPI plus 3% (7.1%), also capped at 6%. Plan 5 loans will have an interest rate of 4.1%, subject to any caps reflecting the Prevailing Market Rate.
Impact and Advice
Last year's RPI rate was 3.2%. The DfE advises borrowers to regularly monitor its website, as rates may change during the academic year.
