Committee publication · Correspondence · 15 April 2026
Correspondence from the Secretary of State for Education on changes to student loan interest rates for 2026/27 academic year, dated 7 April 2026
From: Treasury Committee
Summary
The Department for Education notifies the Treasury Committee of a government decision to cap maximum interest rates on Plan 2 and Plan 3 student loans at 6% for the 2026/27 academic year, replacing the standard RPI +3% formula. The measure aims to shield borrowers from inflation spikes driven by global events such as Middle East tensions and oil price volatility.
Key findings
- Plan 2 and Plan 3 student loan interest rates capped at 6% maximum for 2026/27, replacing the standard RPI +3% formula
- Plan 2 upper interest rate threshold increased to £52,885 on 6 April 2026; repayment threshold increased to £29,385 in April 2026
- Measure taken ahead of the March 2026 RPI outturn (due 22 April 2026) to protect borrowers from temporary inflation caused by global shocks including Middle East instability
- Government reintroducing means-tested maintenance grants of up to £1,000 for low-income students from 2028/29 academic year, non-repayable
- Secretary of State acknowledges inherited system remains 'broken' and requires further reform beyond this temporary protective measure
Tone
FactualTopics
student-financehigher-educationpublic-financeinflation
Key actors
Bridget Phillipson MP, Rachel Reeves MP, Treasury Select Committee, Department for Education
Notable line
“Capping the maximum interest rate at 6% instead of RPI +3% will ensure no Plan 2 or Plan 3 borrower faces an interest rate above 6%, protecting them from any short- term increase in RPI due to global shocks …”
Key Quotes
“The Government has decided to cap the maximum interest rates on both Plan 2 and Plan 3 loans at 6% for Academic Year 2026/27.”
“This measure will protect students and graduates from the potential of inflationary pressures due to the situation in the Middle East and removes the risk of any temporary increase in inflation causing loan balances to compound at an unsustainable rate.”
“… we have inherited a broken student finance system which will not be fixed by this measure alone.”
Source · parliament.uk record ↗