UK student loan rates 2026/27: the 6% cap, repayment thresholds and what actually changes

“Student debt” is rising sharply in UK searches, but the most useful question is not simply how large a graduate's balance is. For income-contingent UK student loans, monthly repayments are driven primarily by earnings above the relevant plan threshold. Interest affects the balance and how quickly it grows or falls, but it does not directly set the monthly payroll deduction in the same way as a conventional bank loan.

For the 2026/27 academic year, the Student Loans Company says the relevant Retail Price Index figure is 4.1%. Plan 2 and postgraduate loans would normally be able to reach RPI plus 3%, or 7.1%, but regulations cap the applicable rate at 6% from 1 September 2026 to 31 August 2027.

2026/27 student loan rates at a glance

Plan	Interest rule for 2026/27	Key point
Plan 1	RPI 4.1% or Bank Base Rate + 1%, whichever is lower	Maximum announced rate 4.1%
Plan 2	Normally RPI + up to 3%	6% cap applies 1 Sep 2026–31 Aug 2027
Plan 5	RPI	4.1% for the announced period
Postgraduate	Normally RPI + 3%	6% cap applies for the period

Repayment thresholds from 6 April 2026

For borrowers working in the UK, annual repayment thresholds differ by plan. The published 2026/27 figures include:

Plan 1: £26,900.
Plan 2: £29,385.
Plan 4: £33,795.
Plan 5: £25,000.
Postgraduate loan: £21,000.

Plans 1, 2, 4 and 5 generally collect 9% of income above the relevant threshold. Postgraduate loans collect 6% above their threshold. If you have more than one applicable loan type, deductions can overlap, so the payslip calculation may be more complicated than a single 9% figure.

Does a 6% interest rate mean you repay 6% of your salary?

No. This is one of the most common sources of confusion. The interest percentage is applied to the loan balance under the rules of the plan. Payroll repayments are calculated from income above the repayment threshold. A borrower can therefore have a high interest rate but a relatively modest monthly deduction if earnings are only slightly above the threshold.

Plan 2: what the 6% cap changes

Without the temporary cap, a Plan 2 borrower at the top end of the normal interest scale could face RPI plus 3%, which would be 7.1% using the 4.1% RPI figure. The 2026 regulations deem the applicable annual rate to be 6% whenever the normal calculation would exceed that level during the cap period.

The cap does not reduce the repayment threshold and does not convert the loan into a fixed-term bank debt. It limits the rate charged to the balance during the specified period.

Plan 5: why the calculation is different

Plan 5 applies to newer English undergraduate borrowers and uses RPI rather than the Plan 2 income-linked RPI-plus-up-to-3% structure. For the announced 2026/27 period, that gives a 4.1% rate. The repayment threshold is £25,000 from April 2026.

Because Plan 5 has different repayment and write-off rules, comparisons with Plan 2 should not be made using interest alone. The lifetime amount repaid depends heavily on earnings over decades.

Should you make voluntary overpayments?

That is not automatically a good decision. For borrowers whose remaining balance is likely to be written off before full repayment, paying extra may simply replace a future write-off with money paid today. For borrowers on high and sustained incomes who are very likely to clear the balance, voluntary payments can reduce future interest.

Before overpaying, check your exact plan, balance, expected repayment horizon, emergency savings and more expensive debts. Student finance is not the same as a credit card or personal loan, so “highest interest first” is not always a complete strategy.

How to check which plan you are on

Your plan depends on where you studied, where you normally lived before the course and when the course started. Use the official GOV.UK and Student Loans Company account information rather than guessing from your graduation year. Scotland uses Plan 4 for many borrowers, while England and Wales have different cohorts across Plans 1, 2 and 5.

How a pay rise changes the deduction

Because repayments are income-contingent, a pay rise affects deductions only on the slice of earnings above the threshold. For a Plan 2 borrower, for example, moving further above the £29,385 threshold increases the amount subject to the 9% rate; the full salary is not multiplied by 9%.

This is why two graduates with the same loan balance can make very different monthly repayments. Income, plan type and payroll frequency matter more to the deduction than the size of the outstanding balance.

What happens if you change jobs or become self-employed?

Employees usually repay through PAYE once earnings cross the relevant threshold. Self-employed borrowers normally account for repayments through Self Assessment. If income varies sharply during the year, the timing of deductions can therefore look different from a steady monthly PAYE pattern even when the underlying plan rules are the same.

Borrowers moving abroad should also update the Student Loans Company rather than assume UK payroll thresholds continue to apply unchanged. Overseas repayment schedules can use country-specific thresholds and evidence requirements.

Why the write-off date matters

A student loan is eventually written off under the rules of the relevant plan if it has not already been repaid. The timing differs between cohorts. That makes the remaining term important when deciding whether voluntary overpayments are sensible.

A borrower close to the end of the write-off period may have a very different financial incentive from someone on a high salary early in a long repayment window. Any decision to pay extra should therefore consider the plan's time horizon, not just the headline interest rate.