Student Loan Interest Caps and Repayment Changes

Starting in the 2026-27 academic year, certain student loans in England will see their interest rates limited to 6%. This adjustment affects Plan 2 loans and Plan 3 postgraduate loans, which will be subject to the cap from September. The policy aims to stabilize repayment amounts for graduates, though it has sparked debate among campaigners who argue for a lower interest rate and repayment threshold.

“The threshold will be frozen at £29,385 between 2027 and 2030, rather than rising with inflation,” said Chancellor Rachel Reeves in the November 2025 Budget.

The new cap means students will begin repaying their loans earlier than they would have under previous terms, and higher salaries will result in increased monthly payments. Currently, Plan 2 loans accrue interest based on the Retail Prices Index (RPI) plus up to 3% depending on earnings. This has led to many graduates struggling to reduce their overall debt, which often exceeds £53,000.

Understanding Loan Plans in the UK

Student loan structures differ across the UK. In England, those who started university between September 2012 and July 2023 are issued Plan 2 loans, which are still available in Wales. Graduates with these loans repay 9% of their income above the repayment threshold. Meanwhile, Plan 5 loans have replaced Plan 2 in England, with variations in terms based on the student’s region of residence.

Plans also vary in Scotland and Northern Ireland. For instance, under-25 students in Scotland receive a maximum annual maintenance loan of £9,400, while those in Northern Ireland can borrow up to £8,132 (or £11,391 for London-based courses). These differences highlight the need to consider regional policies when evaluating financial support.

Maintenance Loans: Coverage and Eligibility

Maintenance loans are designed to cover living expenses such as accommodation, food, books, and equipment. However, research from the Higher Education Policy Institute (May 2024) revealed that in England, these loans typically cover only about half the cost of living, with even less support for students in London.

Eligibility for maintenance loans is means-tested, meaning the amount received depends on household income. Additional funds may be available for students with disabilities or those responsible for children. Estranged students—those under 25 with no contact with parents—can apply without their family’s financial situation being considered.

Regional Variations in Loan Amounts and Grants

In 2025-26, undergraduate students in England and Wales can access higher maintenance loans compared to previous years. For example, the maximum loan for students in England living away from home outside London has risen to £10,544, up from £10,227. The government is also reintroducing maintenance grants of up to £1,000 per year for students in lower-income households enrolled in courses aligned with its Industrial Strategy, starting in 2028.

Welsh students may receive up to £11,345 in maintenance loans, an increase from £11,150. They are also eligible for non-repayable grants. In Northern Ireland, the maximum loan is £8,132 (or £11,391 for London courses). These variations underscore the distinct approaches to student finance across the UK.

From 2026, both tuition fees and maintenance loans in England will rise annually by the Retail Price Index minus mortgage interest (RPIx). At the October 2025 rate, this measure would increase tuition fees by approximately £400, pushing them beyond £9,900. The government has stated that only universities meeting quality benchmarks will charge the maximum rate.