How interest is calculated - Plan 5

Find out how interest is calculated and applied if you have a Plan 5 student loan.

Applies to England

When interest is applied

You’re charged interest from the day we make your first payment to you or to your university or college until your loan has been repaid in full or cancelled. Interest is added to your balance each month.

Annual interest rate changes

The interest rate is usually set on 1 September each year, based on the Retail Price Index of the previous March. The interest rate charged is normally the Retail Price Index.

However, during some periods we may apply an interest cap to ensure you’re not being charged a higher interest rate than the average found in the commercial market.

What is the Retail Price Index?

It’s a measure of inflation, which measures changes to the cost of living in the UK.

What is the interest rate cap?

The Department for Education monitors interest rates set by commercial banks using monthly data provided by the Bank of England.

If the average commercial interest rate is lower than the interest rate you’re being charged on your Plan 5 loan, we’ll apply a temporary interest rate cap, so you’re not disadvantaged. The interest rate will be reviewed monthly and changed if necessary.

The current interest rate is capped at 7.5%.

Previous interest rates

The rates in the table apply to Plan 5 only.

Date Interest rate
1 September 2023 to 31 November 2023 7.3%
1 August 2023 to 31 August 2023 7.1%
Published 25 July 2023
Last updated 1 December 2023 + show all updates
  1. The current interest rate cap and previous interest rates table have been updated

  2. A previous interest rates table has been added

  3. First published.