The Department for Education (DfE), the Welsh Government and the Department for the Economy in Northern Ireland (DfE NI) has today confirmed that the Plan 1 student loan interest rate will change to 6%.
Plan 1 student loans have an interest rate of either RPI (from the March prior to the September when the new interest rates are implemented) or the Bank Base Rate + 1%, whichever is the lower (this is known as the "low interest cap"). The low interest cap mechanism means that the interest rate on Plan 1 loans may change if the Bank Base Rate changes.
The applicable rate of RPI to student loans from 1 September 2023 to 31 August 2024 is 13.5%. However, as the Bank Base Rate + 1% is lower than this, the low interest cap is in place.
On 02 August 2024, the Bank Base Rate changed to 5%. In line with this, from 30 August 2024 the interest rate for Plan 1 loans will decrease from 6.25% to 6%.
