UK caps student loan interest at 6%
Change
The UK capped interest on plan 2 and plan 3 student loans for borrowers in England and Wales at 6%, effective 1 September 2026 for the 2026–27 academic year.
Why it matters
The cap bars any contractual or formula-linked interest increases above 6% for the covered loans during the stated academic year, constraining how much balances can grow even if inflation or market rates rise. Loan servicers must alter automated interest calculations and billing rules to enforce the ceiling rather than applying uncapped indexation.
Implications
- — Student loan servicers' interest-calculation teams must reconfigure systems to apply a 6% ceiling to plan 2 and plan 3 accounts from 1 September 2026, or risk producing incorrect interest accruals on borrower accounts.
- — Student loan servicers' customer-communications teams must update borrower statements and public guidance before 1 September 2026 to reflect the capped rate, or borrowers will receive inaccurate information about interest charges.
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