Student Loan Interest Capped at 6% From September; New Repayment Rules Take Effect
The Department for Education has confirmed new student loan changes effective September 2026: Plan 2 and Postgraduate loans now subject to 6% interest rate cap, Plan 5 repayments continue with £25,000 threshold, and Plan 2 threshold frozen at £29,385 until April 2030.
From 1 September 2026, Plan 2 and Postgraduate student loan interest rates are capped at 6%, down from a potential RPI+3% rate of 7.1%. This follows the Department for Education's August 10 announcement and provides immediate relief for borrowers facing higher cost-of-living pressures.
Key Changes from September 2026
- Plan 2 interest cap: Maximum 6% replaces variable RPI+3% rate (would have been 7.1%)
- Plan 5 repayments: First cohort (students who started August 2023+) now making repayments from income over £25,000/year
- Plan 1 loans: Interest set at 4.1% (RPI) through August 2027
- Plan 2 threshold freeze: Locked at £29,385 from April 2026 through April 2030, creating fiscal drag as wages rise
For graduates and recent students earning £30,000–£35,000, the 6% cap will reduce annual repayments. However, the frozen threshold means that as your salary grows, you'll pay more in repayments because the threshold won't rise with inflation. If you earn £30,000 now and receive a raise to £33,000 by 2030, your Plan 2 repayment obligation will increase even though the £29,385 threshold stays fixed. Expat professionals and international graduates holding UK student loans should review their repayment plan and consider the long-term impact of the threshold freeze on their financial planning.
Sources
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