The Department for Education (DfE) has today confirmed a change to the maximum Plan 2, Plan 5 and PG loan interest rate which will be 7.6% in January 2024.
The applicable rate of RPI to student loans from 1 September 2023 to 31 August 2024 is 13.5%. This means that the maximum interest rate applicable to Plan 2 loans and the interest rate for PG loans is 16.5%, and the interest rate applicable to Plan 5 loans is 13.5%. However, as the comparable prevailing market rate (PMR) is lower than this, an interest rate cap of 7.6% will be applied to all Plan 2, Plan 5 and PG student loans in January 2024.
Plan 2, Plan 5 and PG student loan interest rates are reviewed monthly and, if required, capped for the duration of the calendar month.
The level of the cap is determined by taking the average interest rate for comparable unsecured personal loans across a 12-month period ending three months prior to the month the cap comes into force. This is action is taken where necessary to ensure that the maximum interest rates applicable to Plan 2, Plan 5 and PG loans are either below or equal to PMR.
