UK Student Loan Interest Rates Rise to 4.1% From September 1, 2026

The UK government confirmed on August 10 that student loan interest rates will jump from September 1, 2026, with major changes across all four loan plans. Plan 1 rates will hit 4.1%, Plan 2 will be capped at 6%, and Plan 5 will rise from 3.2% to 4.1%. The Plan 1 repayment threshold climbs to £28,005 from April 2027, meaning graduates must earn more before repayments start.

Interest rate changes by loan plan

Plan 1 loans will charge 4.1% interest from September 1, 2026 to August 31, 2027, tied to the Retail Price Index (RPI). The rate could fall if the Bank of England cuts its base rate, but cannot exceed 4.1% during this period. Plan 2 borrowers will pay between 4.1% and 6% depending on income, with the 6% cap applying to all Plan 2 borrowers from September 1. For example, on a £50,000 balance, 4.1% interest adds about £2,050 annually, while 6% adds about £3,000.

Plan 3 and Plan 5 rates move in opposite directions

Plan 3 interest will fall from 6.2% to 6% due to a government cap, providing relief to older borrowers. Plan 5 loans, the newest plan from the 2023 academic year, will rise from 3.2% to 4.1%, matching the RPI rate. Both changes take effect September 1, 2026. The Department for Education confirmed the rates on its official website.

Repayment threshold increase eases immediate burden

The Plan 1 repayment threshold will rise to £28,005 from April 6, 2027 to April 5, 2028, up from £26,900. This means graduates must earn more before they begin repaying loans. Mortgage-style loans will have a deferment threshold of £44,311 from September 1, 2026. The Labour government noted that borrowers earning less than £44,311 may defer repayments and should contact their loan administrator.

Who pays more and who benefits

Graduates on all plans will see interest accrual increase from September, but only those who fully repay their loans will actually pay more in total. Those on lower incomes who never repay in full will not be affected by higher interest rates. The government advised all borrowers to monitor its website regularly as rates may change during the academic year if the Bank of England adjusts its base rate.

Final Thoughts

From September 1, 2026, UK student loan interest rates will rise across most plans, with Plan 2 capped at 6% and Plan 1 at 4.1%. The higher repayment threshold for Plan 1 loans from April 2027 offers some relief. Graduates should check which plan they are on to understand their exact interest rate and repayment obligations.

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