Interest Rate History
Complete timeline of UK student loan interest rates, showing how rates have changed over time and what determines them.
Plan 1, 4 & 5
3.2%
2024/25 rate
Plan 2
6.2%
RPI + 3%
September RPI
3.2%
Sets next year's rates
How Interest Rates Are Set
Plan 1 & Plan 4
Interest rate is the lower of:
- RPI (Retail Price Index)
- Bank of England base rate + 1%
Plan 2 (Standard)
Interest rate varies by income:
- Below £28,470: RPI only
- £28,471 - £51,245: RPI + 0-3% sliding
- Above £51,245: RPI + 3%
Plan 5 (New)
Simpler rate: RPI only, regardless of income. No additional margin for high earners.
Postgraduate Loans
Standard rate is RPI + 3%, though currently capped at the same level as other loans.
Historical Interest Rates
| Year | RPI | Plan 1 | Plan 2 (Low) | Plan 2 (High) | Plan 4 | Notes |
|---|---|---|---|---|---|---|
| 2024/25 | 7.3% | 7.3% | 7.3% | 7.3% | 7.3% | All plans capped at RPI |
| 2023/24 | 7.1% | 7.1% | 7.1% | 7.1% | 7.1% | Plan 5 introduced |
| 2022/23 | 12.3% | 6.5% | 6.5% | 6.5% | 6.5% | Rates capped below RPI |
| 2021/22 (Mar) | 1.5% | 1.5% | 1.5% | 4.5% | 1.5% | |
| 2020/21 | 2.4% | 1.1% | 2.4% | 5.4% | 1.1% | |
| 2019/20 | 2.4% | 1.75% | 2.4% | 5.4% | 1.75% | |
| 2018/19 | 3.3% | 1.75% | 3.3% | 6.3% | 1.75% | |
| 2017/18 | 1.6% | 1.25% | 1.6% | 4.6% | — | |
| 2016/17 | 0.9% | 1.25% | 0.9% | 3.9% | — | Postgrad loans started |
| 2015/16 | 0.9% | 0.9% | 0.9% | 3.9% | — | |
| 2014/15 | 2.5% | 1.5% | 2.5% | 5.5% | — | |
| 2013/14 | 3.3% | 1.5% | 3.3% | 6.3% | — | |
| 2012/13 | 3.6% | 1.5% | 3.6% | 6.6% | — | Plan 2 started |
Plan 2 (Low) = rate for borrowers earning at/below threshold. Plan 2 (High) = rate for high earners (RPI + 3%). Rates shown are from September each year (when new rates apply).
Key Trends & Events
Inflation Spike
RPI hit 12.3% in September 2022, which would have set rates at 12.3-15.3% for Plan 2. The government introduced a cap to protect borrowers, limiting rates to 6.5%.
COVID era lows
Low inflation during COVID meant Plan 1 rates dropped to just 1.1%, the lowest in years. This was a rare period when student loan interest was genuinely favourable compared to commercial rates.
High Real Rates
Plan 2 high earners faced rates of 5-6.6% during periods of low general inflation. Combined with the threshold freeze in later years, this significantly increased real loan costs for graduates.
Why Interest Rates Matter (And When They Don't)
✓ When Interest Matters
- • You'll repay your loan in full
- • You're considering overpayment
- • You're a high earner (>£50k starting)
- • You have a small loan balance
✗ When It Doesn't
- • You won't repay before write-off
- • Your loan will be written off anyway
- • Interest just adds to what's cancelled
- • Most Plan 2 borrowers fit this category
ℹ️The Key Insight
For most borrowers, the interest rate makes little practical difference, you're paying a fixed percentage of income above threshold until write-off, regardless of the balance. Interest rates only matter if you'll clear the loan in full.
When Are Rates Set?
Annual Rate Setting Timeline
Rates are typically announced in November/December for the following April. The September RPI figure is the key determinant.