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Last reviewed 2026-10-05

Student Loan Changes 2026/27: Plan 2 Freeze, 6% Cap, Plan 5 Live

The 2026/27 academic year brings three significant changes for UK student loan borrowers. Plan 5 repayments have begun for the first time, a 6% interest rate cap applies to Plan 2 and Postgraduate loans from 1 September, and the Plan 2 repayment threshold will be frozen at £29,385 for three years from April 2027. Here's what each change means for you.

At a glance: Three 2026/27 student loan changes you need to know about

  1. Plan 5 repayments began April 2026: the first cohort (2023 starters) is now repaying
  2. 6% interest cap on Plan 2 and Postgraduate: effective 1 September 2026
  3. Plan 2 threshold frozen: stuck at £29,385 from April 2027 to April 2030

1. Plan 5 repayments began April 2026

The first cohort of Plan 5 borrowers, English students who started undergraduate or PGCE courses on or after 1 August 2023, became liable for repayment from April 2026. If you're earning above £25,000, repayments are now being deducted from your salary through PAYE, or via Self Assessment if you're self-employed.

Key Plan 5 facts for 2026/27:

  • Repayment threshold: £25,000/year (£2,083/month, £480/week)
  • Repayment rate: 9% of income above the threshold
  • Interest rate: 4.1% (RPI only, no above-inflation margin)
  • Write-off: 40 years from the first April after your course ends
  • Threshold frozen at £25,000 until April 2027, then rises annually with RPI

Plan 5 is fundamentally different from Plan 2: longer repayment period (40 vs 30 years), lower threshold (£25,000 vs £29,385), but lower interest (RPI only vs RPI + up to 3%). The IFS estimates the average Plan 5 borrower will repay around £8,700 more than they would have under Plan 2.

See our complete Plan 5 guide →

2. 6% interest cap on Plan 2 & Postgraduate loans

On 7 April 2026, the government announced that interest rates on Plan 2 and Postgraduate (Plan 3) student loans will be capped at 6% for the entire 2026/27 academic year, starting 1 September 2026.

Without the cap, the top Plan 2 interest rate could have exceeded 6.6%: RPI stood at 3.6% in February 2026, and higher earners pay RPI plus a 3% margin. The cap limits the maximum rate to 6% regardless of the RPI figure published each September.

Does the 6% cap apply to me? Only if you're on Plan 2 (England Sep 2012 to Jul 2023, or Wales Sep 2012 onwards) or Plan 3 (Postgraduate), and the cap covers England and Wales. It does not apply to Plans 1, 4, or 5, which already use lower interest formulas (RPI only, or the lower of RPI and Bank of England base rate + 1%).

The cap was announced by the Department for Education and Baroness Smith of Malvern, who said:

“Capping the maximum interest rate on Plan 2 and Plan 3 student loans will provide immediate protection for borrowers, supporting those who are most exposed within this already unfair system.”

The government cited the risk of inflation pressures “due to the situation in the Middle East” as the reason for the cap. This is a separate mechanism from the monthly “Prevailing Market Rate” cap that can also apply during the year.

See all current student loan interest rates →

3. Plan 2 threshold frozen at £29,385 (April 2027 to April 2030)

Announced at the Autumn Budget 2025, the Plan 2 repayment threshold rose to £29,385 in April 2026 (already in effect) and is then frozen at that level for three years, covering April 2027, 2028 and 2029, before annual uprating resumes from April 2030.

The interest rate thresholds (the £29,385 lower band and £52,885 upper band that determine your Plan 2 interest rate) are also frozen for the same three-year period.

How much more will you repay?

The Institute for Fiscal Studies estimates the freeze will increase average lifetime repayments for the 2022 university entry cohort by around £3,000 (in today's prices). On the IFS analysis, borrowers in the third decile of lifetime earnings, typically those on mid-level graduate salaries just above the threshold, are hit hardest, repaying around £5,000 more on average over 30 years.

Worked example: the fiscal drag effect

For a Plan 2 borrower whose salary rises while the £29,385 threshold stays put, 9% is charged on everything above £29,385:

  • April 2026 earning £29,300, below the £29,385 threshold, repay £0
  • April 2027 earning £30,200, £815 above the frozen threshold, repay £73 a year
  • April 2028 earning £31,100, £1,715 above, repay £154 a year
  • April 2029 earning £32,000, £2,615 above, repay £235 a year

Threshold and repayment rate: HMRC rates and thresholds for employers 2026 to 2027. Freeze period: Autumn Budget 2025. Illustrative salaries follow Money Saving Expert's January 2026 analysis of the freeze.

Studied in Wales? Welsh students who started on or after 1 September 2012 are on Plan 2, not Plan 5, so the £29,385 threshold applies to you now. Whether the Welsh Government will mirror the Westminster freeze from April 2027 has not been confirmed, so check Student Finance Wales before assuming your threshold is or is not frozen.

Should you overpay before the freeze? Use our calculator →

Repayment thresholds for 2026/27

Here's the full picture of current thresholds for every plan:

PlanYearly thresholdMonthlyRepay %Interest rate 2026/27
Plan 1£26,900£2,2419%4.1%
Plan 2 (frozen 2027-30)£29,385£2,4489%4.1%–7.1% (capped at 6.0% since Sept 2026)
Postgraduate (Plan 3)£21,000£1,7506%7.1% (capped at 6.0% since Sept 2026)
Plan 4 (Scotland)£33,795£2,8169%4.1%
Plan 5 (new)£25,000£2,0839%4.1%

Source: gov.uk Student loans T&Cs 2026/27, Commons Library research briefing CBP-10654. RPI March 2026 = 4.1%.

Frequently asked questions

When did Plan 5 student loan repayments start?

Plan 5 student loan repayments began in April 2026 at the earliest. This applies to English students who started undergraduate courses on or after 1 August 2023. The first repayments are deducted through PAYE or Self Assessment if income is above the £25,000 threshold.

What is the 6% interest rate cap on student loans?

From 1 September 2026, interest on Plan 2 and Postgraduate (Plan 3) student loans is capped at 6% for the 2026/27 academic year. It was announced on 7 April 2026 by the Department for Education and Baroness Smith of Malvern, and covers England and Wales. It does not apply to Plans 1, 4, or 5.

When is the Plan 2 repayment threshold frozen?

The Plan 2 repayment threshold rose to £29,385 in April 2026 and is then frozen at £29,385 from April 2027 to April 2030. The freeze was announced at the Autumn Budget 2025.

What is the Plan 2 repayment threshold for 2026-27?

The Plan 2 repayment threshold for the 2026-27 tax year is £29,385 a year, £2,448 a month or £565 a week. You repay 9% of everything you earn above it.

What is the current Plan 5 interest rate?

The Plan 5 interest rate is 4.1% (RPI March 2026). Plan 5 loans use RPI only, with no above-inflation margin, unlike Plan 2 which charges RPI plus up to 3%. This means Plan 5 balances do not grow faster than inflation in real terms.

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