UK Student Loan Interest Rates Explained — 2025/26

Student loan interest in the UK is one of the least understood aspects of an already complicated system. Here is what is actually happening to your balance each year.

The Basics

All UK student loan plans charge interest linked to the Retail Price Index (RPI) — a measure of inflation. The idea is that your loan balance rises with inflation so that the real value of what you owe stays roughly constant over time.

Different plans then add varying surcharges on top of RPI.

Interest by Plan

Plan 1

Interest equals the lower of RPI inflation, or Bank of England base rate plus 1%. This means Plan 1 interest is capped and generally lower than other plans, particularly in high-interest-rate environments.

Plan 2

Interest is tiered based on income:

• While studying: RPI + 3%
• After graduating, income below £28,470: RPI only
• After graduating, income £28,470 to £51,995: RPI + up to 3% (scales proportionally)
• After graduating, income above £51,995: RPI + 3%

A government cap prevents the rate exceeding certain commercial benchmarks when prevailing interest rates are low.

Plan 4

Same structure as Plan 1 — lower of RPI or base rate + 1%.

Plan 5

Interest equals RPI only, regardless of income. Simpler than Plan 2 and with no income-linked surcharge, though the 40-year write-off period means interest accumulates for longer before cancellation.

Postgraduate

Interest equals RPI + 3% from the date of the first payment, regardless of income level. This is the same rate as Plan 2 loans for high earners.

Does Interest Rate Matter If I Will Not Repay in Full?

This is the key question — and for many graduates, the answer is no. If your loan is going to be written off before you repay it, interest only affects how large a balance is cancelled. It does not change how much you actually pay, which is determined solely by your income and the repayment rate.

Interest only affects your actual repayments if you will repay your loan in full. In that case, a higher interest rate means you pay more in total.

How to Check Your Current Rate

Your current interest rate is displayed in your Student Loans Company account. Rates are updated each September for Plan 2 and Postgraduate loans, and each April for Plan 1 and Plan 4.