There are five Student Loan Plans that borrowers and payroll professionals need to be aware of (and software needs to accommodate). The Student Loans Company (SLC) has announced one threshold for 2027/28 tax year but all interest rates that apply for the academic year 2026/27.
For Student Loan repayments and the interest calculated on outstanding balances, there are two years to be considered:
- The tax year concerns repayment and runs from 06 April 2027 to 05 April 2028;
- The academic year concerns the interest charged on outstanding balances and runs from 01 September 2026 to 31 August 2027.
On 10 August 2026, the SLC announced the threshold for Plan 1 will increase from £26,900 to £28,005. For payroll and software professionals, this is far too early to be concerned about. Plus, it is not a complete picture of the Student Loan Plan landscape.
However, the announcement also advises the interest repayment rates that apply to outstanding balances for the academic year 2026/27 (the year running from 01 September 2026 until 31 August 2027). This can be summarised as follows and note:
1. The Retail Price Index (RPI) measure of inflation used is 4.1%, being the rate for the year to March 2026;
2. The Bank of England base rate, currently 3.75%, may change which may mean a change to the interest rate where this is considered
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Student Loan Plan
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Interest Rate
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Plan 1
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The lower of:
- RPI (4.1%); or
- The Bank of England base rate + 1% (3.75% + 1% = 4.75%)
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Plan 2
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Variable rate of interest depending on the individual’s circumstances:
- 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%)
However, for the 2026/27 academic year, a 07 April 2026 announcement, legislated by The Education (Student Loans) (Repayment) (Amendment) Regulations 2026 capped the maximum interest rate at 6%
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Plan 3
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The interest rate is RPI + 3% (7.1%), however, subject to the same announcement and legislation above that caps the rate at 6% for the 2026/27 academic year
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Plan 4
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This has not been announced but is either the Retail Price Index (RPI) rate of inflation or the Bank of England base rate plus 1%, whichever is lower
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Plan 5
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RPI (4.1%) + 1%
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For Bookkeepers
This information is provided for information only to show the complicated and confusing picture that surrounds Student Loan Plans and the rate of interest that is applied. It is a fact that many borrowers do not repay their Loans in full, therefore, perhaps, the write-off date is more important than the Loan interest rate. These are equally-complicated and varying.
However, professionals are concerned more with the threshold, i.e. how much should be deducted each pay period. As of August 2026, so far we only know the Plan 1 threshold for tax year 2026/27.