UK Caps Plan 2 Student Loan Interest at 6% for 2026-27
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- Baroness Jacqui Smith announced the 6% interest cap on Plan 2 and Plan 3 (postgraduate) student loans for the 2026-27 academic year, citing the need to 'defend against the consequences of far-away conflicts in an uncertain world' and calling the existing system 'already unfair.'
- Plan 2 loans, issued in England between September 2012 and July 2023 and still issued in Wales, currently charge RPI plus up to 3%, meaning highest-earning graduates' debt is rising 6.2% this year (RPI 3.2% + 3%).
- Caps are not unprecedented — previous caps were in place from July 2021 to February 2022 and September 2022 to August 2024, with the highest previous cap at 8%.
- Amira Campbell, president of the National Union of Students, called the move a 'huge win' but demanded the chancellor reverse freezes to the repayment threshold announced in November's Budget.
- Tom Allingham (Save the Student), Oliver Gardner (Rethink Repayment), and Nick Hillman (Higher Education Policy Institute) all called the cap a 'stopgap' or 'temporary measure' that doesn't fix the underlying 'student loans crisis.'
- Conservative shadow education secretary Laura Trott accused the government of 'tinkering around the edges, while graduates will still be paying interest above inflation.'
- The cap comes as MPs launched a parliamentary inquiry into student loans in March amid 'widespread dissatisfaction' over repayment terms, after a BBC investigation found officials had been asked not to use the word 'debt' in a presentation to teenagers.
Why it matters: Highest-earning Plan 2 graduates are currently seeing their debt compound at 6.2%, and the cap is the third such intervention since 2021 — yet every stakeholder from the NUS to the Higher Education Policy Institute calls it a temporary fix that doesn't address the repayment threshold freeze from November's Budget or the wider 'broken' system ministers inherited.
