Plan 2 student loan interest rates capped at 6% in England
Why it matters: The 6% cap will directly impact Plan 2 and postgraduate student loan holders in England for the 2026-27 academic year.
- The UK government announced a 6% cap on interest rates for Plan 2 and postgraduate student loans in England for the 2026-27 academic year.
- Skills Minister Baroness Jacqui Smith stated the cap aims to protect graduates from inflation risks stemming from global conflicts, specifically mentioning the Iran war.
- The cap applies to Plan 2 loans (issued in England between Sept 2012 and July 2023, and still in Wales) and Plan 3 (postgraduate) loans.
- The Plan 2 interest rate is typically the retail prices index (RPI) plus up to 3%, with analysts believing RPI is rising due to the Iran war.
- This is not the first time such a cap has been introduced, with previous caps reaching as high as 8% between 2021 and 2024 to manage high inflation.
England is capping interest rates on Plan 2 and postgraduate student loans at 6% for the 2026-27 academic year, a move designed to shield graduates from the financial impact of rising inflation, particularly due to the Iran war. This intervention follows previous caps and comes amidst broader calls for an overhaul of the student loan system.
