Student loan interest rate decision 'short-term intervention'

Student loan interest rate decision 'short-term intervention'The Government has capped rates at six per cent, but experts said it didn't address the underlying issuesCommentsMoneySteven Smith Content Editor07:16, 08 Apr 2026View 3 ImagesThe Government has made a decision on student loans(Image: Pexels)The interest rates on Plan 2 student loans are set to be capped at six per cent, but experts warn it's "a plaster on an already festering wound". The Government is capping the maximum interest rates on Plan 2 and 3 student loans at six per cent from September 1, for the 2026/27 academic year, it has been announced.‌This measure will protect students and graduates in England and Wales from the potential of inflation pressures due to the war in the Middle East. This reform removes the risk of any temporary increase in inflation, causing loan balances to compound at an unsustainable rate.‌Graduates with Plan 2 loans currently pay interest rates of between Retail Prices Index (RPI) and RPI plus three per cent, depending on their earnings. Current students on Plan 2 and Plan 3 also attract an interest rate of RPI plus three per cent while they are studying. Interest on Plan 2 and 3 student loans will be capped at six per cent instead of RPI plus three per cent to protect borrowers, the government confirmed.‌This will ensure no Plan 2 or Plan 3 borrower faces an interest rate of above six per cent, protecting them from any short-term increase in RPI due to global shocks, such as temporary spikes in oil prices. The repayment threshold for Plan 2 loans was increased to £28,470 in April 2025 – its first increase since 2021 – and it was increased again on April 6 this year, to £29,385.Minister for Skills, Jacqui Smith, said: "We know that the conflict in the Middle East is causing anxiety at home and while the risk of global shocks is beyond our control, protecting people here is not. Capping the maximum interest rate on Plan 2 and Plan 3 stude...