New Student Loan Interest Rates and Repayment Threshold Updates Announced

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August 19, 2025

Student Loan Interest Rates Set for 2025-2026: What Borrowers Need to Know

London, UK – significant shifts are coming to Student Loan repayments for millions of graduates across the United Kingdom, as new interest rates have been confirmed for the period spanning September 1st, 2025, to August 31st, 2026. These changes will affect borrowers under various repayment plans,necessitating a clear understanding of the new financial landscape.

Understanding the Key Influencers: RPI and the Bank Base Rate

The determination of these interest rates hinges on two primary economic indicators: the Retail price Index (RPI) and the Bank of England’s Base Rate. The RPI currently stands at 3.2%, representing a measure of inflation, while the Bank Base Rate is presently at 4%. These figures play a crucial role in calculating the rates applicable to different student loan plans.

Plan-by-Plan Breakdown: Interest Rates in detail

Here’s a detailed look at the interest rates for each Student Loan plan:

Plan 1 Loans (1998-2012)

For borrowers with Plan 1 loans, the interest rate will be the lower of either 3.2%, the applicable RPI, or 5% (the Bank Base Rate + 1%). consequently, the maximum interest rate for Plan 1 loans during this period will be capped at 3.2%.

Plan 2 Loans (2012-2023)

Individuals repaying Plan 2 loans will encounter variable interest rates. While studying and for a period after graduation, the rate will be RPI (3.2%) plus 3%, totaling 6.2%. Post-study, the interest rate will fluctuate, starting at RPI (3.2%) and potentially rising on a sliding scale up to RPI plus 3% (6.2%), depending on income levels.

Circumstances	Interest Rate
Whilst Studying / Post-Study Initial Period	6.2%
Post-Study (Income Dependent)	3.2% – 6.2% (Sliding scale)

Plan 5 Loans (From 2023 Academic Year)

Borrowers with Plan 5 loans will face an interest rate of RPI (3.2%) plus 0%,resulting in a 3.2% rate. This plan, introduced for students beginning their courses in the 2023 academic year, offers a comparatively lower interest rate structure.

Postgraduate Loans (Plan 3)

For those with Postgraduate Master’s or Doctoral loans, the maximum interest rate will be RPI (3.2%) plus 3%, equating to 6.2%.

Mortgage-Style Loans

Interest on mortgage-style loans will be aligned with the RPI, settling at 3.2% for the period between September 1st, 2025, and August 31st, 2026. The deferment threshold for these loans is set at £41,613.

Did You Know? The interest rates are subject to change if the Bank of England adjusts the Base Rate,so regular monitoring is advised.

Repayment Thresholds: Plan 1 & 5 Updates

Beyond interest rates, repayment thresholds are also being adjusted. The repayment threshold for Plan 1 loans will increase to £26,900 from April 6th, 2026, to april 5th, 2027. Plan 5 loans will begin requiring repayments when income reaches £25,000, starting in April 2026.

Pro Tip: Utilize the Student loan Company’s online tools to estimate your monthly repayments based on your income and loan plan.

These adjustments aim to align repayment obligations with current economic conditions and individual earning potential.

What impact will these changes have on your student loan repayment strategy? And do you feel the updated thresholds adequately reflect the cost of living?

Understanding Student Loans: A Long-Term Viewpoint

The student Loan System in the UK is a complex one,designed to support access to higher education. Understanding the intricacies of each plan, including interest rates, repayment thresholds, and available support options, is essential for borrowers to manage their finances effectively. Regular updates and a proactive approach to loan management are vital for minimizing long-term debt.

Frequently Asked Questions

• What is RPI and how dose it affect my student loan? RPI (Retail Price Index) is a measure of inflation and is used to calculate interest rates on some student loan plans.
• What is the Bank Base Rate and why is it relevant to student loans? The Bank Base Rate influences the interest rates on student loans,particularly Plan 1.
• How do I find out which student loan plan I am on? You can determine your loan plan by contacting the Student Loan company or checking your online account.
• will my interest rate change during the year? Yes, if the Bank of England adjusts the Bank Base Rate, your interest rate may change.
• Where can I find more facts about these changes? Visit the Student Loan Company’s website for detailed information and personalized guidance.

Stay informed and proactively manage your student loan repayments to navigate these changes successfully.

What impact will the new interest rate caps have on my monthly student loan repayments?

Understanding the Changes to Student Loan Repayments

As of August 19, 2025, significant changes have been announced regarding student loan interest rates and repayment thresholds for graduates across England, Wales, Scotland, and Northern Ireland. These updates impact those currently repaying their loans, as well as new borrowers taking out loans from this academic year onwards. This article breaks down the key changes and what they mean for you,covering Plan 2,Plan 3,and Plan 5 loans.

New Interest Rates: A Detailed Breakdown

The biggest shift concerns how student loan interest is calculated. Previously, rates were linked to the Retail Price Index (RPI) plus a fixed percentage. now, the system is changing.

Plan 2 Loans (Loans taken out before 2012): Interest rates will be capped at 7.6% for borrowers earning over the repayment threshold. Rates will vary based on income, with lower earners paying less.

Plan 3 Loans (Loans taken out between 2012 and 2023): Interest rates are now aligned with the RPI, but with a maximum cap of 7.6%.This represents a significant change for manny, notably those who previously faced higher rates.

Plan 5 Loans (Loans taken out from 2023 onwards – the new income contingent repayment plan): Interest rates will be linked to RPI, with a maximum cap of 7.6%. This plan also features income-contingent repayments, meaning your monthly payments are based on your income.

It’s crucial to understand that these are maximum rates. Actual interest charged will depend on your individual income. The Student Loans Company (SLC) provides a loan repayment calculator to help you estimate your repayments.

Revised Repayment Thresholds: What You Need to Know

Alongside interest rate changes, the student loan repayment thresholds have also been adjusted. These thresholds determine the income level at which you begin repaying your loan.

England: The repayment threshold for Plan 2 loans has increased to £27,295 per year (£2,274.58 per month). For Plan 5 loans, the threshold is £25,000 per year (£2,083.33 per month).

Wales: Wales has adopted the same repayment thresholds as England for all loan plans.

Scotland: Scottish graduates with Plan 1 loans have a repayment threshold of £20,000 per year (£1,666.67 per month).Plan 2 and 5 thresholds align with England and Wales.

Northern Ireland: Repayment thresholds mirror those in England and Wales.

These increases mean that more graduates will fall below the repayment threshold, perhaps delaying or reducing their monthly payments. Use the SLC repayment calculator to determine your new repayment amount.

impact on different Loan Plans: A Comparative Analysis

| Loan Plan | Interest Rate (max) | Repayment Threshold (Annual) | Key Features |

| :——– | :—————— | :—————————- | :—————————————– |

| Plan 1 | Variable (Lower) | £20,000 (Scotland) | Older loans,generally lower interest rates |

| Plan 2 | 7.6% | £27,295 (England/Wales/NI) | Loans taken out before 2012 |

| Plan 3 | 7.6% | £27,295 (England/Wales/NI) | Loans taken out between 2012-2023 |

| Plan 5 | 7.6% | £25,000 (England/Wales/NI) | Newest plan, income-contingent repayments |

Benefits of the New System

While navigating student loan repayments can be complex, these changes offer several potential benefits:

Reduced Repayments: Higher repayment thresholds mean lower monthly payments for many borrowers.

Interest Rate Caps: The 7.6% cap provides certainty and prevents rates from spiraling upwards.

Fairer System: The income-contingent nature of Plan 5 aims to make repayments more manageable based on individual financial circumstances.

Practical Tips for Managing Your Student Loans

Use the SLC Repayment Calculator: Regularly check the SLC website (https://www.gov.uk/student-loan-repayment) to estimate your repayments and understand how changes impact you.

Consider Overpayments (If Affordable): If your financial situation allows, making overpayments can reduce the total amount of interest you pay over the life of your loan.

Explore Additional Support: The MoneyHelper service (https://www.moneyhelper.org.uk/en) offers free and impartial financial advice.

Understand Loan Forgiveness: Be aware of the conditions under which your loan may be forgiven (e.g.,after a certain period of repayment or due to specific circumstances).

Real-World Example: