Students: Loans

Student loans are subject to interest to ensure that those who can afford to do so contribute to the full cost of their degree. The government does not make a profit from the student loan repayment system.

The department is determined that the higher education (HE) funding system should deliver for our economy, for universities and for students and the government is committed to supporting the aspiration of every person who meets the requirements and wants to go to university. We will set out this government’s longer-term plan for HE reform by summer 2025.

Interest rates on student loans do not affect monthly repayments made by borrowers. Regular repayments are based on a fixed percentage of earnings above the applicable student loan repayment threshold, not on the amount borrowed or the rate of interest. If a borrower’s income drops, so does the amount they repay. If income is below the relevant student loan repayment threshold, or a borrower is not earning, then they do not have to make repayments at all. Any outstanding debt, including interest built up, is written off after the loan term ends (or in case of death or disability) at no detriment to the borrower.

Interest rates are set annually in relation to the Retail Price Index. The government caps maximum student loan rates when needed to ensure that student loan interest rates do not exceed market rates for comparable unsecured personal loans.

A full equality impact assessment of how student loan reforms may affect graduates, including detail on changes to average lifetime repayments under Plan 5, was produced and published in February 2022 and can be found here: https://www.gov.uk/government/publications/higher-education-reform-equality-impact-assessment.