How interest is calculated - Plan 5

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 thecomparable averagerates 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 interestcomparable market rates set by commercial banks using monthly data providedpublished by the Bank of England.

If the average commercialcomparable interestmarket rate is lower than the interest rate you’re being charged on your Plan 52 loan, we’ll apply a temporary interest rate cap, so you’re not disadvantaged. The interestcomparable market rate willis be reviewed monthly and changeda change to the interest rate cap made if necessary.

The current interest rate cap is capped at 7.8%.7.9%.

Previous interest rates

The rates in the table apply to Plan 5 only.