How is interest calculated on student loans?

Interest rates vary by loan plan. Plan 1 uses the lower of RPI or the Bank of England base rate plus 1%, currently 4.1%. Plan 4 uses the same method, also 4.1%. Plan 5 uses RPI only, 4.1%, with no margin ever. Plan 2 runs from RPI (4.1%) at incomes of £29,385 or less up to RPI plus 3% (7.1% uncapped) at incomes of £52,885 or more. Postgraduate loans use RPI plus 3% regardless of income. Plan 2 and Postgraduate interest has been capped at 6% since 1 September 2026, for the 2026/27 academic year.

Does interest start accumulating immediately?

Yes, interest starts accumulating from the day the loan is paid into your account or to your university, not from when you start making repayments.

Why does my loan balance keep increasing?

If you are not earning above the repayment threshold or if your repayments are lower than the interest being added, your loan balance will increase over time as interest accumulates.

Student Loan Interest Calculator UK: How Much Interest Is Added

This page does one job: it shows how much interest is added to your student loan balance each day, month and year, and what that does to the balance over time. It does not tell you what you repay, because on a UK student loan the two are unconnected. Your repayment is a fixed percentage of income, not a function of the balance or the interest rate.

For your payoff date, write-off date and total cost, use the main student loan payoff and write-off calculator. For the payslip figure, use the monthly repayment calculator. Every tool is listed in the calculator directory.

About Interest Calculation

Uses plan rules (including Plan 2’s income banding) and compounds monthly with no repayments.

Loan Plan

Annual Salary

Plan 2 interest scales from RPI to RPI+3% based on income.

Current Loan Balance

Years to Project

How far into the future to project (no repayments).

Assumptions

RPI (%)

Base rate (%)Used for Plan 1/4: lower of RPI or Base+1%

Plan 2 lower income (£)

Plan 2 upper income (£)

Interest is RPI at/below lower income, RPI+3% at/above upper; linear in between.

£10,436 of interest over 5 years

At 4.2%, a £45,000 balance grows to £55,436 if you make no repayments — a rise of 23%.

This does not change what you repay. Your deduction is a fixed percentage of income above the threshold, so a higher rate only changes the balance and therefore how much is written off at the end of the term.

Interest projection, 2026/27 rates

Current interest rate

4.2%

Banded by income, RPI 4.1% to RPI+3%, capped at 6% for 2026/27

Interest added a month

£157

About £5.15 a day, charged daily and added monthly

Balance after 5 years

£55,436

No repayments assumed

Total interest added

£10,436

Over the 5-year period

£45,000 × 4.2% ÷ 12 = £156.69

Plan 2, 2026/27 rate. Interest is charged daily on the balance and added to it monthly, so it compounds.

£45,000 × (1 + 0.348%) ^ 60 = £55,436

The balance after 5 years of monthly compounding with no repayments.

Start: £45,000End: £55,436

Rates, assumptions and sources

Last reviewed: 16 October 2026 · Verified against gov.uk and SLC published figures

Every figure below is the 2026-27 published figure, read from this site's single source of truth at page-render time^[source]. The 6% Plan 2 and Postgraduate interest cap covers the 2026/27 year only and is not assumed to continue^[source].

Repayment threshold, rate, interest, write-off period and threshold freeze status by student loan plan, 2026-27
Plan	Threshold	Rate	Interest	Written off	Threshold freeze
Plan 2	£29,385^[source]	9%	4.1% to 7.1% by income, capped at 6% for 2026-27^[source]	30 years^[source]	Frozen at £29,385 until April 2030

Write-off is counted from the April after the course ends, not from the course-end date itself, and the Plan 2 interest bands (£29,385 lower, £52,885 upper) are frozen alongside the Plan 2 repayment threshold.

This calculator also assumes

RPI used: 4.1% (editable, left)
Bank of England base rate: 4.0% — an assumption, not a published loan rate
Compounding: Monthly, on the whole balance
Repayments modelled: None — this is gross interest only
Rate held for: All 5 years; in reality it is reset each 1 September from that March's RPI

Growth, inflation and long-run interest figures are assumptions, not published rates. Change them and the projection changes.

Interest rules for the 2026/27 tax year^[source]. Assumptions used are shown to the left and can be changed. For the full rate history see the thresholds and rates by tax year browser.

Related Calculators

Overpayment Calculator

See if making early repayments could save you money

Total Cost Calculator

Calculate the lifetime cost of your student loan

How is student loan interest calculated?

Interest is charged daily on your outstanding balance and added to it monthly, so it compounds. The rate is set from RPI inflation, and how much is added on top of RPI depends on your plan. Interest starts from the day the first instalment is paid out to you or your university, not from the day you graduate, which is why a balance is already larger than the amount borrowed by the time repayments begin. A higher rate does not raise your monthly repayment: it only changes the balance, and therefore how much is left to be written off at the end of the term.

Understanding Student Loan Interest

Each plan has different interest rules. Plan 2 scales with income; Plan 5 is RPI; Postgrad is RPI+3%; Plan 1/4 are the lower of RPI or Base+1%^[source]. For the full rules on how each rate is set and when it changes, see our student loan interest rates guide.