Britain Caps Student Loan Interest at 6% Amid Inflation Fears

Britain announced a 6% cap on interest rates for Plan 2 and Plan 3 student loans starting in the 2026-27 academic year.

“Interest on some student loans in England will be capped at 6% in the next academic year”

BBC

The cap applies to Plan 2 loans issued in England between September 2012 and July 2023 and to postgraduate Plan 3 loans.

BBC

The system previously required interest at RPI plus up to 3%, meaning high earners faced rates over 6%.

Skills Minister Jacqui Smith said the government was acting to defend against the consequences of far-away conflicts.

Critics caution the cap does not address underlying flaws of the student loan system.

The cap responds to fears that inflation could spike due to global instability.

The Department for Education emphasized the UK was not involved in the conflict.

Devdiscourse

The cap will last for the 2026-27 academic year, with future rates depending on inflation.

The move follows repeated government interventions to impose caps.

Rachel Reeves faced growing calls to reform Plan 2 loans after freezing the repayment threshold.

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Financial Times

Campaigners called for more comprehensive changes, particularly to the repayment threshold.

The system guarantees the government will lose money on student borrowing.

Outstanding student loan debt in the UK exceeds £292bn.