Last checked: 8th November 2026.
Interest on Plan 2 undergraduate and Plan 3 postgraduate student loans is capped at 6% from 1st September 2026 until 31st August 2027. The temporary measure limits how much interest can be added to these loans during the 2026/27 academic year.
This guide explains which student loans are covered, how the 6% cap works and what it means for borrowers. It also looks at whether the cap affects monthly repayments and why SAAS-funded Scottish student loans are not included.
Change at a glance
Interest on Plan 2 and Plan 3 student loans cannot exceed 6% during the 2026/27 academic year.
When
1st September 2026 to 31st August 2027
The cap is already in force and is due to end after 31st August 2027.
Maximum interest rate
6%
This is a ceiling, not a flat rate charged to every borrower.
Where it applies
England and Wales loan plans
It applies to Plan 2 undergraduate and Plan 3 postgraduate loans, not every student loan across the UK.
Who is affected?
Current students and graduates with a Plan 2 or Plan 3 loan. Your loan plan matters, not simply where you live now.
What do you need to do?
Nothing to claim or apply for. Check your repayment plan if you are unsure which rules apply to your loan.
What does the 6% student loan interest cap do?
The cap limits the annual interest rate that can be charged on Plan 2 and Plan 3 loans to 6% for the 2026/27 academic year. It was announced by the Department for Education on 7th April 2026 and was brought into force through the Education (Student Loans) (Repayment) (Amendment) Regulations 2026. Interest is added to your loan balance each month, so the cap limits the rate used to work out that added interest.
Without the cap, the standard rate for these loans would be based on the Retail Prices Index (RPI), plus an additional 3 percentage points. For the year from September 2026, RPI is 4.1%, making the usual RPI-plus-3% rate 7.1%. The temporary limit reduces that maximum to 6%.
The cap is a maximum, not a promise that every borrower will be charged exactly 6%. Some Plan 2 borrowers will have a lower rate because their interest depends on their income.
Which student loans are covered?
Plan 2 undergraduate loans
The cap covers Plan 2 loans. These include English undergraduate loans for courses started from September 2012 to July 2023, and Welsh undergraduate loans under Plan 2. While studying, the usual rate is RPI plus 3%. After leaving a course, the rate normally varies according to income. During this cap period, neither calculation can result in an interest rate above 6%.
Plan 3 postgraduate loans
Plan 3 is the postgraduate loan plan used in England and Wales. Its normal interest rate for 2026/27 would be RPI plus 3%, or 7.1%. The cap limits the rate to 6% for the same period.
The cap applies to eligible loans whether you are still studying or have finished your course and are repaying. Interest can continue to be added while you are studying, after you graduate and during periods when your income is too low for repayments to be taken.
Plan 5 undergraduate loans are not included in this temporary 6% cap. These loans are for eligible courses in England starting on or after 1st August 2023, and their normal interest rate is based on RPI alone rather than RPI plus 3%. However, Plan 5 interest can still be subject to a separate temporary cap if the prevailing market rate is lower than the rate otherwise charged. This is reviewed monthly and is not the same as the specific 6% cap covering Plan 2 and Plan 3 loans.
How does the cap work while you are studying?
For Plan 2 borrowers, the usual interest rate while studying is RPI plus 3%. With RPI at 4.1% for 2026/27, that would normally be 7.1%, but the temporary cap limits it to 6%.
Full-time Plan 2 students
The usual RPI-plus-3% rate applies while you study and until 6th April after you finish or leave your course. The 6% cap applies during the temporary period.
Part-time Plan 2 students
The usual rate applies while you study and until 6th April after you finish or leave, or until 6th April four years after your course began if that comes first. The 6% cap applies during the temporary period.
After the relevant date, Plan 2 interest normally switches to the income-based calculation. The cap still limits the maximum rate during the period covered by the temporary measure. Plan 3 postgraduate loans are also subject to the 6% maximum for the 2026/27 period.
Is 6% the interest rate everyone will pay?
No. The 6% figure is the highest rate that can apply under this temporary measure. For Plan 2 borrowers who have left their course, the interest rate normally varies with annual income. It starts at the RPI rate of 4.1% and rises on a sliding scale, but cannot exceed 6% during this cap period.
Plan 2 students who are still studying are normally charged RPI plus 3%. For 2026/27 that would be 7.1%, so the cap limits their rate to 6%. Plan 3 postgraduate loans also normally attract RPI plus 3%, with the same 6% maximum applying during this period.
Plan 2 interest after leaving your course
These are annual income figures used to calculate the interest rate, not the amount you repay. The examples use the 2026/27 RPI rate of 4.1%, with the temporary cap limiting the maximum interest rate to 6%.
These are examples for Plan 2 borrowers after leaving their course. Plan 2 students who are still studying and Plan 3 borrowers have a flat 6% maximum during this period.
Worked example
What could the 6% cap mean on a £40,000 balance?
At 7.1%: £2,840 interest over a year.
At 6%: £2,400 interest over a year.
Illustrative difference: £440
This illustration shows the difference in interest added to the loan, not a cash saving or a reduction in monthly repayments. It assumes a £40,000 balance stays unchanged for a full year and that the uncapped rate would otherwise have been 7.1%. It is relevant to a Plan 3 loan or a Plan 2 borrower whose income would otherwise put them at the top rate. Actual interest is calculated daily and added to the balance monthly, so your result will differ as your balance and circumstances change.
Does the cap reduce your monthly student loan repayments?
No. The cap changes the interest added to your outstanding loan balance. It does not change the income thresholds or the percentage of earnings used to calculate your repayments.
If you repay through PAYE, the amount deducted from your wages continues to depend on your income and repayment plan. The same principle applies if you repay through Self Assessment. A lower interest rate can slow the growth of the balance, but it does not automatically mean a smaller deduction from your monthly pay.
What is the difference between the 6% interest cap and the 6% postgraduate repayment rate?
They are two completely different things. The temporary 6% cap is an interest rate limit. The 6% postgraduate repayment rate is the percentage of earnings that a borrower repays above the postgraduate loan repayment threshold.
Plan 2 undergraduate loan
9%
Repayment is normally 9% of earnings above £29,385 a year for the 2026/27 tax year.
Plan 3 postgraduate loan
6%
Repayment is normally 6% of earnings above £21,000 a year for the 2026/27 tax year.
If you have both a Plan 2 loan and a postgraduate loan, you may have deductions for both. The repayment calculations are separate, using the relevant threshold and percentage for each loan type. The temporary interest cap does not change either repayment percentage or threshold.
If your income is below the repayment threshold for a loan, you normally do not have to make repayments towards it. However, interest can still be added to the outstanding balance. This means your balance may continue to increase even when no repayments are being taken.
Why might your student loan balance still go up?
The 6% cap limits the interest rate, but it does not freeze your loan balance. Interest continues to accrue and is added to your balance monthly. If the interest added is greater than the repayments credited to your account, your balance can rise.
This can happen while you are studying, when your earnings are below the repayment threshold, or when your repayments are relatively small compared with the interest being added. The cap reduces the amount of interest that can be charged compared with an uncapped 7.1% rate, but it does not guarantee that you will see your balance fall.
Does the 6% cap apply to student loans in Scotland?
Important for Scotland
SAAS-funded Scottish student loans are Plan 4, so they are not covered by this particular 6% cap.
The repayment plan attached to your loan matters more than where you live now. If you live in Scotland but previously took out a Plan 2 or Plan 3 loan through the English or Welsh student finance systems, you can still be covered.
Scotland, England, Wales and Northern Ireland have different student finance arrangements. This particular cap is set out in legislation covering England and Wales. It does not replace the separate student loan rules used by the Student Awards Agency Scotland (SAAS). Check the plan shown in your Student Loans Company account if you are unsure which rules apply to you.
When does the student loan interest cap end?
The cap runs from 1st September 2026 until the end of 31st August 2027. The regulations that introduce it are also set to expire at the end of 31st August 2027.
After that, the usual interest rules are due to apply unless the government announces another change or a separate prevailing-market-rate cap applies. The interest rate for the next academic year will need to be checked when it is officially confirmed. The 6% limit should not be assumed to continue beyond August 2027.
How can you check whether you have a Plan 2 or Plan 3 loan?
You can check your repayment plan through your online Student Loans Company account. The plan type is also shown in your annual statement. If you have more than one student loan, you may have more than one plan type.
Check your repayment plan before assuming that the cap applies. If the details in your account do not look right, contact the Student Loans Company.
Check your student loan repayment plan
Use the official GOV.UK guide to identify which repayment plan applies to your loan.
Student loan interest cap
Frequently asked questions
Practical answers about the 6% cap, eligible repayment plans and what it means for borrowers.
Is student loan interest capped at 6% from September 2026?
Yes. Interest on Plan 2 and Plan 3 loans is capped at a maximum of 6% from 1st September 2026 to 31st August 2027.
Does the 6% cap apply to Plan 2 loans while studying?
Yes. The cap applies to Plan 2 borrowers while studying and after leaving or finishing their course, during the stated period.
Does the cap apply to postgraduate student loans?
It applies to Plan 3 postgraduate loans in England and Wales. Their usual 2026/27 rate of 7.1% is limited to 6%.
Are Scottish student loans included?
SAAS-funded Scottish loans are normally Plan 4 and are not covered by this specific cap. A borrower living in Scotland with an existing Plan 2 or Plan 3 loan can still be covered.
Is the 6% interest cap the same as the postgraduate repayment rate?
No. The cap limits the interest added to eligible loans. The 6% postgraduate repayment rate is the percentage of earnings above the postgraduate repayment threshold that a borrower repays. They are separate calculations.
Can my student loan balance increase even with the cap?
Yes. Interest continues to be added during the cap period. If the interest added is greater than the repayments credited to your account, your outstanding balance can still rise.
Will my monthly student loan deduction go down?
No. The cap changes the interest added to the loan balance, not the income-based repayment calculation or the amount normally deducted from your pay.
Will the 6% cap continue after August 2027?
The current regulations expire at the end of 31st August 2027. A further extension or replacement measure would need to be confirmed separately.
How much could the 6% cap save me?
It depends on your loan balance and the interest rate you would otherwise have paid. For example, on a balance of £40,000, 6% rather than 7.1% would mean around £440 less interest over a year if the balance stayed unchanged. This is an illustration, not a guaranteed saving.
Do I need to apply for the interest cap?
No. The cap is applied under the loan rules. You do not need to make a claim or contact the Student Loans Company to request it.
Student loan interest cap
Official information and sources
The government guidance and legislation used to check this article.
01 · Department for Education
Interest rate cap introduced to protect Plan 2 borrowers
The announcement confirming the 6% cap for Plan 2 and Plan 3 loans during 2026/27.
02 · Student Loans Company
Student loan interest rates for 2026 to 2027
Confirms the RPI figure and the rates that apply to Plan 2 and Plan 3 loans.
03 · Legislation
The Education (Student Loans) (Repayment) (Amendment) Regulations 2026
The regulations that put the temporary 6% maximum into law and set the expiry date.
04 · Student Awards Agency Scotland
Student loans: a guide to terms and conditions 2026 to 2027
Explains that SAAS-funded Scottish loans are normally Repayment Plan 4.
05 · Student Loans Company guidance
How interest is calculated on a Plan 2 loan
Explains how Plan 2 interest is calculated after you leave your course, including the income-based rate and examples for 2026/27.
06 · Student Loans Company
Student loans: a guide to terms and conditions 2026 to 2027
The current terms and conditions explain how interest is calculated daily and added to the loan balance monthly, and set out the rules for each repayment plan.
07 · GOV.UK repayment guidance
How much you repay on your student loan
Official repayment thresholds and percentages for Plan 2 and postgraduate loans, including what happens if you have more than one loan plan.
Information note: This article is general information based on official guidance and legislation available on 8th November 2026. It is not personal financial advice. Check your Student Loans Company account and the latest official guidance if you need to confirm how the rules apply to your loan.
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