Student loan interest rates: how each plan's rate is set
Every UK student loan plan is charged interest linked to inflation, but the exact recipe differs by plan. This guide sets them side by side.
The common ground
- Interest is charged from the day your first payment is made, to you or to your university or college.
- It’s added to your balance each month until the loan is repaid in full, written off or cancelled.
- The rate is usually set on 1 September each year, based on the previous March’s Retail Price Index (RPI), a measure of inflation. It can also change during the year.
- The rates are set by the UK government. The Student Loans Company applies them but can’t change them.
Plan by plan
| Plan | How the rate is built | Rate used on this site |
|---|---|---|
| Plan 1 | The lower of RPI or the Bank of England base rate plus 1% | 4.1% |
| Plan 2 | RPI plus 3% while studying, then RPI plus up to 3% based on income, subject to a cap | 4.1% to 6% |
| Plan 4 (Scotland) | The lower of RPI or the Bank of England base rate plus 1% | 4.1% |
| Plan 5 | Normally RPI, with a possible cap | 4.1% |
| Postgraduate Loan | Normally RPI plus 3%, with a cap currently applied | 6% |
The interest rate cap
Plans 2, 5 and the Postgraduate Loan can have a temporary cap. The Department for Education compares the loan rate with comparable market rates from Bank of England data. If the market rate is lower, a cap applies so borrowers aren’t charged more than comparable commercial lending. It’s reviewed monthly. GOV.UK says the Plan 2 and Postgraduate Loan caps are currently being applied at 6%, and that the Plan 5 cap isn’t currently being applied.
Plan 2 is different
Plan 2’s rate after you leave your course depends on your income. See how student loan interest works for the formula and worked figures.
Recent history
GOV.UK’s published tables show that rates can move a lot. For the whole of each September-to-August year:
| Year | Plan 1, 4 and 5 | Postgraduate Loan |
|---|---|---|
| 2024 to 2025 | 4.3% | 7.3% |
| 2025 to 2026 | 3.2% | 6.2% |
Rates on Plan 5 and the Postgraduate Loan also changed several times through 2023 and 2024, so a rate can move between September resets. That’s one reason a projection like the calculator is only as good as its assumptions, and why you can test different returns and salaries.
What it means for you
A high rate only costs you real money if you’d repay the loan in full. If the balance will be written off, a higher or lower rate mostly changes a number that gets cancelled. See should I overpay my student loan?
Sources: GOV.UK interest pages for Plan 1, Plan 2, Plan 4, Plan 5 and the Postgraduate Loan. Rates change, so check the current ones there.