The legislation to cap the Plan 2 and Plan 3 Student Loan interest rate came into force on 01 September 2026. This does not affect the Student Loan thresholds but does raise some points which we highlight.
ICB has advised that we know one Student Loan threshold for tax year 2027/28, though it is too early to think about a tax year that starts in April 2027. It is not too early to think about an academic year that starts 01 September through to 31 August 2027.
With regard interest that is charged on outstanding Plan 2 and Plan 3 Student Loan balances, The Education (Student Loans) (Repayment) (Amendment) Regulations 2026 caps the maximum interest rate at 6% for this academic year. Which raises a few points for consideration if they are queried:
- The legislation only applies to Plans 2 and 3, therefore, only applies to borrowers from England and Wales;
- The cap is time-limited and expires on 31 August 2027. Therefore, no cap is in place for the academic year starting 01 September 2027; though.
- If the Loan interest charged does not exceed 6%, the Regulations will have no practical impact
For Bookkeepers
The above is provided for information purposes. Currently, interest on Plans 2 and 3 is charged as follows:
- Whilst studying and until the April after leaving the course: RPI + 3% (7.1%);
- Post-study: RPI (4.1%), rising on a sliding scale up to RPI + 3% (7.1%)
Therefore, the cap will have an impact as the rate of interest exceeds 6%.
From 01 September 2027, the interest rate reverts to the above (uncapped) formula - unless new legislation is introduced for the academic year 2027/28. This is something we suggest borrowers should look for.