UK Student Loan Interest Rates Explained
Updated January 2025 Rates for 2024/25 academic year
Key point: Interest on UK student loans starts accruing from the day you receive the money — not when you start repaying. Different plans have different interest rate calculations.
Current Interest Rates by Plan Type
Interest rates are set each September and apply until the following August. Here are the current rates:
| Plan | How Rate Is Calculated | Current Rate |
|---|---|---|
| Plan 1 | Lower of RPI or Bank of England base rate + 1% | 5.5% |
| Plan 2 | RPI + 0% to 3% (income-based taper) | 4.3% - 7.3% |
| Plan 4 | Lower of RPI or Bank of England base rate + 1% | 5.5% |
| Plan 5 | RPI only (no additional percentage) | 4.3% |
| Postgraduate | RPI + 3% | 7.3% |
Rates from September 2024. RPI figure: 4.3%. Source: GOV.UK
Plan 1 and Plan 4 Interest
Plans 1 and 4 use the simpler interest calculation:
- Interest = the lower of RPI or Bank of England base rate + 1%
- This typically results in lower rates than Plan 2
- When the BoE rate is high, you benefit from the RPI cap
- When RPI is high, you benefit from the BoE rate cap
Example calculation
RPI: 4.3% | BoE base rate: 4.75%
BoE + 1% = 5.75%
Lower of 4.3% and 5.75% = 4.3%
(In practice, a cap may result in a different rate)
Plan 2 Interest: The Income Taper
Plan 2 has a more complex system where your interest rate depends on your income:
How the taper works
- Earning below £27,295: Interest = RPI only (currently 4.3%)
- Earning above £49,130: Interest = RPI + 3% (currently 7.3%)
- Earning between: Interest scales linearly between these rates
While studying
During your course and until the April after you leave, you're charged RPI + 3% regardless of income. This is the maximum rate.
The Prevailing Market Rate (PMR) Cap
Since 2023, a cap has been applied to prevent Plan 2/5/Postgraduate rates exceeding commercial rates. When RPI is very high, the PMR cap kicks in to limit your rate.
Plan 5 Interest
Plan 5 (for students starting from August 2023) has the simplest interest:
- Interest = RPI only, with no additional percentage
- No income-based taper like Plan 2
- Designed to be more "fair" but comes with a longer 40-year write-off period
Does Interest Make a Difference?
Whether interest matters depends on your likely repayment outcome:
If you'll repay in full
Interest significantly increases your total cost. Higher earners who'll clear their loan should consider the rate carefully.
If your loan will be written off
For most graduates, the loan will be written off before it's repaid. In this case, interest affects your paper balance but not your actual lifetime payments — which are purely income-based.
Use our UK student loan calculator to see whether you're likely to repay in full or have your loan written off.
Historical Interest Rates
| Period | RPI | Plan 2 Max | Plan 1/4 |
|---|---|---|---|
| Sep 2024 - Aug 2025 | 4.3% | 7.3% | 5.5% |
| Sep 2023 - Aug 2024 | 6.9% | 7.7% (capped) | 6.25% |
| Sep 2022 - Aug 2023 | 12.3% | 7.3% (capped) | 6.5% |