Interest on Plan 2 and Plan 3 student loans in England and Wales is capped at 6% for the 2026/27 academic year, which began on 1 September 2026. The cap replaces the usual maximum of RPI plus 3%, which would have stood at 7.1% this year. The Department for Education announced the change on 7 April 2026, and the Student Loans Company published the full set of 2026/27 rates on 10 August.
The 2026/27 rates by plan
Student loan interest is fixed for each academic year from the Retail Price Index (RPI). For the period 1 September 2026 to 31 August 2027, the applicable RPI figure is 4.1%. The Department for Education says the RPI value is taken for the year to March before each academic year, which for 2026/27 meant March 2026. The Student Loans Company warns that rates may change during the academic year, so the published figures should be checked before a repayment is calculated.
| Loan plan | Rate for 2026/27 | Maximum after the cap |
|---|---|---|
| Plan 1 (undergraduates, pre-2012) | Lower of RPI (4.1%) or Bank Base Rate + 1% (4.75% at present) | 4.1% |
| Plan 2 (undergraduates, 2012 to 2023) | RPI + 3% (7.1%) while studying; between RPI and RPI + 3% after study, depending on income | 6% |
| Plan 3 (postgraduates) | RPI + 3% (7.1%) | 6% |
| Plan 5 (undergraduates, from 2023) | RPI (4.1%) | Not covered by the 6% cap |
Plan 2 is the group most affected by the change. While studying, Plan 2 borrowers pay the full RPI plus 3% rate, which the cap now limits to 6%. After leaving the course, the rate moves on a sliding scale with income, from RPI at the bottom to RPI plus 3% at the top, and the cap applies to the upper end of that scale. Plan 3 postgraduate loans follow the same 6% ceiling.
Plan 1 works differently. Its rate is the lower of RPI and the Bank Base Rate plus 1%. With Bank Rate at 3.75%, the second figure is 4.75%, so the RPI figure of 4.1% applies.
Why the government capped Plan 2 and Plan 3 rates
The government says the cap protects borrowers from a short-term rise in RPI caused by the conflict in the Middle East, including spikes in oil prices. In its April press release, the Department for Education said the measure "removes the risk of any temporary increase in inflation causing loan balances to compound at an unsustainable rate". Jacqui Smith, Minister for Skills, said that "capping the maximum interest rate on Plan 2 and Plan 3 student loans will provide immediate protection for borrowers".
The wider inflation picture is also moving. At its meeting ending on 16 September 2026, the Bank of England's Monetary Policy Committee voted 6-3 to hold Bank Rate at 3.75%. Three members voted to raise it to 4%. The committee said CPI inflation rose to 3.1% in August and is likely to rise further over coming quarters. Its next decision is due on 5 November 2026.
What the cap is worth on a balance
The cap only changes the rate for borrowers whose rate would otherwise exceed 6%, so its effect depends on the plan and on income. A Plan 3 borrower on the full RPI plus 3% rate pays 1.1 percentage points less than they would without the cap. On a balance of £40,000, a full year of interest at 6% comes to £2,400, compared with £2,840 at 7.1%. The difference is £440 a year before any repayments are made. The same arithmetic scales with the balance: each £10,000 owed carries £600 of interest over a year at 6%, against £710 at 7.1%. The figures illustrate the arithmetic and do not estimate any individual's bill.
Thresholds and who is affected
The Plan 2 repayment threshold rose to £29,385 on 6 April 2026, up from £28,470 a year earlier. The Student Loans Company says the Plan 1 threshold will rise to £28,005 from 6 April 2027. The cap applies to Plan 2 and Plan 3 loans only. The government's April release describes the measure as protecting students and graduates in England and Wales.
The cap is an interest measure and does not change how repayments are set. The Department for Education says repayments are determined by income and outstanding loans, and that any balance still owed at the end of the repayment term is written off. The April release does not link the 6% limit to either rule.
Further changes under review
The same April release lists two other student finance measures. Targeted, means-tested maintenance grants of up to £1,000 are due to return from the 2028/29 academic year, and the grant does not have to be repaid. The minister also said the government is "continuing to look at the broken Plan 2 system we inherited", which leaves the wider structure of Plan 2 open. The government has not set out a timetable for any change to the Plan 2 structure in the documents cited here.
The cap runs to 31 August 2027
Both the April announcement and the August rates notice apply the 6% limit only to the period from 1 September 2026 to 31 August 2027. The rate for the following academic year will be set from the RPI figure for March 2027. Neither notice says whether the cap will continue beyond that date.
Sources: GOV.UK, Interest rate cap introduced to protect Plan 2 borrowers (7 April 2026); GOV.UK, Student Loans Interest Rates and Repayment Threshold Announcement (10 August 2026); Bank of England, Monetary Policy Summary and Minutes, September 2026.