Major interest rate change for millions under Andy Burnham - what you need to know

A major change to interest rates impacting millions of Britons will come into effect under Prime Minister Andy Burnham in the near future

Yesterday, the Department for Education confirmed a six per cent ceiling on interest rates for Plan 2 and Plan 3 student loans will come into force on September 1.

The Student Loans Company (SLC) revealed the updated rates and repayment thresholds for the 2026-27 academic year on Monday, with the changes remaining in effect until August 31, 2027.

In a statement, SLC said: "The applicable Retail Price Index (RPI rate) is 4.1 per cent for the period September 1, 2026 to August 31, 2027,"

The base rate currently stands at 3.75 per cent, making the combined figure 4.75 per cent. Since the RPI measure comes in beneath that threshold, Plan 1 holders will be charged 4.1 per cent over the coming year.

SLC added: "The maximum interest rate on Plan 1 Income Contingent Repayment Loans during the period September 1, 2026 until August 31, 2027 will be 4.1 per cent."

Graduates repaying under Plan 2 face interest charges that fluctuate between the base RPI figure of 4.1 per cent and RPI plus three percentage points, ordinarily reaching as high as 7.1 per cent depending on individual circumstances.

However, the newly imposed cap means no Plan 2 borrower will pay more than six per cent during the 2026-27 period.

Postgraduate borrowers on Plan 3 are subject to the same arrangement.

"The interest rate for Plan 3 is RPI + three per cent (7.1 per cent)," the Student Loans Company stated, adding that "the maximum interest rate applied to Plan 3 loans will be capped at six per cent between September 1, 2026 to August 31, 2027."

Those holding Plan 5 undergraduate loans will be charged interest at the RPI rate of 4.1 per cent for the year ahead.

Mortgage Style Loans carry the same 4.1 per cent rate throughout the period, with a deferment threshold set at £44,311 from 1 September 2026 to 31 August 2027.

Meanwhile, the repayment threshold for Plan 1 borrowers is due to rise to £28,005, applying from April 6, 2027 through to April 5, 2028.

The increase means graduates earning below that amount will not be required to make repayments on their Plan 1 loans during that window.

Since getting the keys to Number 10 Downing Street last month, Mr Burnham has pledged to finally bring the cost of living for the country.