The Labour government, led by Andy Burnham and John Healey, has officially confirmed the interest rates for student loan repayments for the period from 1 September 2026 to 31 August 2027. The announcement, published on the official government website, reveals that the interest rate for Income Contingent Student Loans under Plan 1 (for loans taken between 1998 and 2012) will be set at 4.1 per cent, aligning with the Retail Prices Index (RPI).
Plan 1 Loans: Rate and Threshold Changes
For Plan 1 loans, the interest rate will remain at RPI (4.1%) for the upcoming year, subject to any decrease in the Bank of England base rate from 1 September. Additionally, the repayment threshold for Plan 1 loans will increase to £28,005, effective from 6 April 2027 to 5 April 2028. This adjustment aims to reflect changes in earnings and inflation.
Plan 2 and Plan 3 Loans: Variable Rates with Caps
Plan 2 loans, which cover undergraduate loans taken between 2012 and 2023, will see interest rates vary between RPI (4.1%) and RPI plus 3 per cent (7.1%), depending on individual circumstances. However, the maximum interest rate for Plan 2 loans will be capped at 6 per cent for the period from 1 September 2026 to 31 August 2027. Similarly, Plan 3 loans, which are for postgraduate master's loans, will have their interest rates capped at 6 per cent, as announced on 7 April 2026.
Plan 5 Loans and Mortgage-Style Loans
For Plan 5 loans, introduced for new borrowers from August 2023, the interest rate will be fixed at RPI (4.1%) for the same period. Mortgage-style loans, which are older loans taken out before 1998, will also be subject to an interest rate of RPI (4.1%). The deferment threshold for mortgage-style loans has been set at £44,311 for the period from 1 September 2026 to 31 August 2027.
Government Guidance for Borrowers
The government has advised that borrowers with mortgage-style loans should direct any queries to their loan administrator. This confirmation provides clarity for millions of graduates and students across the UK, ensuring they are aware of the financial implications for the upcoming year.
