Student loan interest calculator
Plan 2 student loan interest for 2026/27 runs on income: it is RPI (4.1%) at incomes at or below £29,385, rising to RPI plus 3 per cent (7.1%) at £52,885 or above, capped at 6.0% under gov.uk's Plan 2 interest rules.
How does Plan 2 interest work?
The interest rate on a Plan 2 loan depends on income, not on the size of the balance. At or below £29,385 the rate is RPI, 4.1% for 2026/27, under gov.uk's guidance on how interest is calculated. It rises in a straight line up to RPI plus 3 per cent, 7.1%, once income reaches £52,885. A separate cap holds the headline rate at 6.0% for the year, so the rate applied is whichever of the two figures is lower.
Interest is added to the balance rather than taken from pay. Repayment is fixed at 9 per cent of income above the threshold, and the loan is written off 30 years after repayments start, under gov.uk's guidance on what you pay. A rising balance only costs real money once income is high enough to clear the whole debt before that write-off. For most graduates that point is not reached, so the interest rate has limited practical effect.
| Income | Interest rate |
|---|---|
| At or below £29,385 | 4.1% (RPI) |
| £52,885 or above | 6.0% (capped) |
What would a worked example show?
Taking a £45,000 balance on a £35,000 income places the rate between the two thresholds, at approximately 4.8%. On £45,000 that produces an estimated £2,168 of interest over a year, about £181 a month. Whether that interest matters depends on whether this balance is projected to clear before write-off; if not, it is added to a sum that would eventually be cancelled.
Common questions
What interest rate is charged on a Plan 2 student loan?
It runs on a sliding scale by income. While studying and on incomes at or below £29,385 the rate is RPI (4.1% for 2026/27). It climbs to RPI plus 3% (7.1%) at incomes of £52,885 or more. A cap holds the headline rate at 6.0% for the year.
Does the interest rate actually matter?
For most graduates, no. Plan 2 loans are written off 30 years after repayments start, and repayments are 9% of income over the threshold, not a rate that clears the debt. If you are never going to repay the full balance before write-off, the interest is added to a debt that gets cancelled anyway, so the rate changes nothing you actually pay.
Who does the interest rate matter for?
Higher earners who will clear the whole balance before the 30-year write-off. For them, interest is real money on top, and a lower rate or an overpayment can save. The overpayment tool works out which side of that line you are on.
Why is my balance going up even though I am repaying?
Because the interest added each year can be more than your 9% repayments, especially early in a career on a modest salary. The balance rising looks alarming, but it only matters if you were going to repay in full, which most people do not.
What is the 6% cap?
A rule that stops the Plan 2 interest rate rising above 6.0% for the year, even when RPI plus 3% would be higher. It applies to the year to 31 August 2027 and can change, so the headline rate is the lower of the income-based rate and the cap.
How does Plan 2 interest work?
The rate depends on income rather than the size of the balance. At or below £29,385 the rate is RPI, 4.1% for 2026/27, rising in a straight line to RPI plus 3 per cent, 7.1%, once income reaches £52,885. A separate cap holds the headline rate at 6.0% for the year.
What would a worked example show?
A balance of £45,000 on an income of £35,000 sits between the two thresholds, giving a rate of approximately 4.8%. That produces an estimated £2,168 of interest over a year, about £181 a month, added to the balance rather than taken from pay. Whether that interest matters depends on whether the balance is projected to clear before the write-off point.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.