Key takeaways
- The Plan 2 student loan interest rate for 2026/27 is 4.18% on a £30,000 salary and 6% once income passes about £44,270, where a temporary cap replaces RPI plus 3%.
- On a £45,000 balance the 6% cap removes £495.00 of interest at a £60,000 salary and £40.50 at a £45,000 salary. At £30,000 it removes nothing.
- A £45,000 balance stops growing at a salary of £59,385 under the cap, against £64,885 at the uncapped 7.1%. The cap moves that line down by £5,500.
- Plan 3 postgraduate loans get the same 6% cap on a flat RPI plus 3%, worth £145.27 a year on the £13,206 maximum Master's loan.
- The cap expires on 31 August 2027, and 39% of Plan 2 full-time loan outlay isn't expected to be repaid at all.
The Plan 2 student loan interest rate depends on your salary, not your balance
If you're on Plan 2 and you want to know what you're being charged this year, the answer sits between 4.1% and 6%. Which end you land on is set by your income, once you've left your course. While you're still studying the rate is a flat RPI plus 3%, so the cap takes it to 6% whatever you earn.
The Student Loans Company confirmed the numbers on 10 August 2026. For the year running 1 September 2026 to 31 August 2027 the applicable RPI figure is 4.1%, taken from the Office for National Statistics reading for March 2026. Plan 2 interest normally runs from RPI at the bottom of the scale to RPI plus 3%, which is 7.1%, at the top. The Department for Education announced on 7 April 2026 that it would hold the maximum at 6% for this one academic year instead.
So the student loan interest rate for 2026/27 is 4.18% if you earn £30,000, and 6% if you earn £60,000. The size of your balance never enters that calculation. It only decides how many pounds the rate turns into.
Interest added in 2026/27 on a £45,000 and a £60,000 balance
Here's the year, at three salaries, on two balances. The capped column is what's actually charged. The uncapped column is what the same borrower would have been charged on RPI plus up to 3% without the April announcement.
| Opening balance | Salary | Capped rate | Interest added | Uncapped rate | Interest without the cap | Repaid in the year | Balance movement |
|---|---|---|---|---|---|---|---|
| £45,000 | £30,000 | 4.18% | £1,881.00 | 4.18% | £1,881.00 | £55.35 | up £1,825.65 |
| £45,000 | £45,000 | 6.00% | £2,700.00 | 6.09% | £2,740.50 | £1,405.35 | up £1,294.65 |
| £45,000 | £60,000 | 6.00% | £2,700.00 | 7.10% | £3,195.00 | £2,755.35 | down £55.35 |
| £60,000 | £30,000 | 4.18% | £2,508.00 | 4.18% | £2,508.00 | £55.35 | up £2,452.65 |
| £60,000 | £45,000 | 6.00% | £3,600.00 | 6.09% | £3,654.00 | £1,405.35 | up £2,194.65 |
| £60,000 | £60,000 | 6.00% | £3,600.00 | 7.10% | £4,260.00 | £2,755.35 | up £844.65 |
| Plan 3, £13,206 | £30,000 | 6.00% | £792.36 | 7.10% | £937.63 | £540.00 | up £252.36 |
Two things jump out of that table. The first is how small the repayment column is at £30,000: £55.35 for the whole year, against £1,881.00 of interest on a £45,000 balance. The second is that only one of the six Plan 2 rows shrinks. A £55.35 annual deduction barely registers in a household budget, while £1,881.00 of interest on the same holding does.
The 6% cap is worth nothing below an income of about £44,270
Plan 2 interest above the lower repayment threshold is tapered, and the taper is published arithmetic rather than a judgement call. The Student Loans Company takes how far your income sits between the lower threshold of £29,385 and the higher threshold of £52,885, then applies that proportion to 3%.
On £40,000, the guidance works it through in full. Take £40,000 minus £29,385, which is £10,615. The band between the two thresholds is £23,500 wide, and £10,615 divided by £23,500 is 0.451. Multiply by 3 and you get 1.35 percentage points on top of RPI, so 5.46% in total.
Run that taper to the point where it reaches 6% and you get an income of about £44,270. Below that line, RPI plus the taper already comes to less than 6%, and the Plan 2 student loan interest cap changes nothing whatsoever. The Student Loans Company's own examples put a £35,000 earner at 4.82% and a £40,000 earner at 5.46%. Neither of those borrowers is affected by the cap by a single penny.
Above the line the saving builds quickly, because the gap between the capped 6% and the uncapped rate widens until income reaches £52,885 and the uncapped rate tops out at 7.1%. On a £45,000 balance that's £40.50 of interest removed at a £45,000 salary and £495.00 at £60,000. On a £60,000 balance it's £54.00 and £660.00. The chart above plots the capped interest bill on a £45,000 balance at six salaries, and the flat stretch from £45,000 upward is the cap doing its work.
Whether the balance still grows comes down to one salary figure
Interest accrued and amount repaid are two different numbers, and conflating them is how people end up surprised by a statement. Repayments on Plan 2 are 9% of income above £29,385, regardless of what you owe. Interest is a percentage of what you owe, regardless of what you repay.
Set those two against each other and there's a single salary at which they balance. On a £45,000 balance charged 6%, the interest is £2,700.00 a year, and 9% of income above the threshold reaches £2,700.00 at a salary of £59,385. Below that, the balance grows. Above it, it falls. On a £60,000 balance the same line sits at £69,385.
Without the cap, those lines sit higher. At the uncapped 7.1%, a £45,000 balance needs a salary of £64,885 to stand still, and a £60,000 balance needs £76,718. The cap pulls the first line down by £5,500 and the second by £7,333.
That matters for exactly one row of the table. A borrower on £60,000 with a £45,000 balance sees it fall by £55.35 over the year under the cap. Without the cap the same balance would have risen by £439.65. Nothing else in the table changes direction, which is the honest summary of what a one-year cap can do.
Plan 3 postgraduate loans get the same cap on a flat rate
Plan 3 is the postgraduate plan, and it works differently in two ways. The rate isn't tapered by income: it's RPI plus 3% for everyone, so 7.1% for 2026/27 before the cap and 6% after it. And repayments are 6% of income above £21,000 rather than 9% above £29,385.
Because the rate is flat, the cap is worth the same proportion to every Plan 3 borrower. On the £13,206 maximum Master's loan for courses starting on or after 1 August 2026, interest at 6% is £792.36 against £937.63 at 7.1%, a difference of £145.27. A £30,000 earner repays £540.00 towards it over the year, so the balance still rises by £252.36.
The break-even salary for that loan is £34,206 under the cap and £36,627 without it. That Plan 3 balance starts falling at an ordinary graduate salary. A £45,000 Plan 2 balance needs £59,385 to do the same thing.
The word cap means two different things on GOV.UK
This is the part that confuses people reading the guidance, because two separate ceilings share one name. One has been there for years. The other was announced in April 2026.
The standing one is a market-rate cap. Student Loans Company guidance describes it as making sure "you're not charged a higher interest rate than comparable rates found in the commercial market", with the Department for Education checking comparable rates against Bank of England data every month. That mechanism is what held Plan 2 interest at 8% through August 2024, and at a series of ceilings between 6.9% and 7.5% across 2023. The guidance is explicit about when it bites: if comparable market rates fall below the rate being charged, a cap is applied.
The new one is a policy decision for a single academic year, announced on 7 April 2026 and framed as protection against inflation pressure from the Middle East. Both land on the same figure: the Plan 2 guidance now states that "the interest rate cap is currently being applied at 6%".
Worth keeping in proportion, though. For 1 September 2025 to 31 August 2026, with no cap in force, Plan 2 rates ran from 3.2% to 6.2%. The new ceiling sits 0.2 percentage points below last year's top rate. The bottom of a Plan 2 range is RPI itself, and it moved from 3.2% to 4.1% between the two Marches. That is what shifted the range, rather than any change in the ceiling.
The rate on your April statement isn't the rate you finish the year on
There's a timing quirk worth knowing about, because it makes the figures above look wrong when you check them mid-year. The Student Loans Company doesn't know your annual income until HMRC tells it. During the tax year it charges the RPI rate only, which is 4.1%, and reconciles afterwards.
So a £60,000 earner is charged 4.1% through the year, then has the balance adjusted once HMRC data arrives. The income-tapered rate is applied retrospectively, not as you go. So the Plan 2 student loan interest rate on a mid-year statement is the RPI floor, not the rate you finish on. The same thing happens if you're self-employed, unemployed for part of the year, or if the Student Loans Company simply doesn't have your income yet.
Interest is also calculated daily and applied monthly, which the terms and conditions call compound interest. The annual figures in the table use the opening balance and the annual rate, so they're a clean comparison between the capped and uncapped cases rather than a prediction of a statement line.
The strongest objection: for most Plan 2 borrowers the rate changes nothing
Here's the case against paying much attention to any of this. Plan 2 loans are written off 30 years after the April you were first due to repay, and the Department for Education doesn't expect most of the money back. Its forecast puts the RAB charge for Plan 2 full-time higher education loans at 39% in the 2025-26 financial year, meaning 39% of that year's outlay isn't expected to be repaid in present-value terms.
For a borrower whose balance is heading for write-off, the interest rate is a number on a statement and nothing more. Repayments are fixed at 9% of income above the threshold whatever the rate, so a lower rate shortens the queue of interest that gets cancelled rather than reducing anything paid. That's the group for whom the headline 1.1 percentage point saving is worth precisely zero.
The counter to the counter is the balance-movement column. Plan 2 interest above RPI is the mechanism that makes a balance grow while income sits under the break-even salary, and the Department's own forecast notes that previous Plan 2 cohorts "were charged interest above RPI so could repay more than 100% of their loan in real terms". Whether the rate matters to you depends on which side of the break-even salary you sit, and it isn't knowable in advance for a career that hasn't happened yet.
There's a scale check available too. The Student Loans Company applied £12.2 billion of interest to higher education loans in financial year 2025-26, a fall of 19.4% on the year before, against a total balance of £294.6 billion. Average repayment through HMRC was £1,150 for 2024-25, and only 51.1% of borrowers liable to repay made a repayment at all.
What this arithmetic can't tell you
The table only measures one year on a fixed opening balance at a fixed salary. Real balances move monthly, real salaries move mid-year, and both break the clean annual figure. The calculation is a comparison, not a forecast of your statement.
It also assumes the published taper and the published RPI, and both are set once a year. The rate from 1 September 2027 depends on the RPI reading for March 2027, which doesn't exist yet. RPI for the year to August 2026 was 3.4%, down from 4.1% in March, so a rate set on a lower reading could fall below 6% without any cap at all.
And this is England and Wales only, for Plan 2 and Plan 3. Plan 1 is charged 4.1% or the Bank base rate plus 1%, whichever is lower. Plan 5, which covers anyone starting an undergraduate course from August 2023, is charged RPI alone at 4.1% and runs for 40 years rather than 30. None of the cap arithmetic applies to either.
What would change these numbers
Three dates do the work. The cap applies between 1 September 2026 and 31 August 2027, so the 6% ceiling lifts on 1 September 2027 unless something replaces it. The rate that follows is fixed by the March 2027 RPI reading. And the Plan 2 repayment threshold is frozen at £29,385 until April 2030, which holds the break-even salary at a fixed cash figure while pay moves around it.
The Plan 2 student loan interest rate for the next academic year lands in the Student Loans Company's August announcement, which is where the applicable RPI and any cap are confirmed. On the repayment side of the same loan, the student loan plan 2 threshold freeze runs on that same £29,385 figure, and the income tax threshold freeze is measured against the same salary. The taper itself runs on the annual income HMRC passes to the Student Loans Company, and HMRC defines salary sacrifice as an employee giving up "the right to part of the cash remuneration due under his or her contract of employment".