Student loan interest calculator
Enter a Plan 2 balance and income to see the interest building up each year. Then read the important caveat: for most graduates the rate never decides what they repay.
How Plan 2 interest works
The interest rate on a Plan 2 loan depends on your income, not your balance. At or below £29,385 the rate is RPI, currently 4.1%. It rises in a straight line up to RPI plus 3%, which is 7.1%, once income reaches £52,885. A separate cap holds the headline rate at 6.0% for the year, so the figure used is the lower of the two.
The headlines miss an important point. Interest is added to your balance, but it is not what leaves your pay. Repayment is fixed at 9% of income over the threshold, and the loan is written off 30 years after repayments start. So a rising balance only costs you real money if your income is high enough to clear the whole debt before that write-off. For most graduates it never gets close, and the interest rate is largely irrelevant.
Worked example
Take a £45,000 balance on a £35,000 income. That income sits between the two thresholds, so the rate lands around 4.8%. On £45,000 that is roughly £2,168 of interest in a year, about £181 a month. It appears large, but unless this graduate goes on to repay the full balance before write-off, that interest is added to a debt that gets cancelled, so it does not change what they hand over.
Common questions
What interest rate is charged on a Plan 2 student loan?
It runs on a sliding scale by income. While studying and on incomes at or below £29,385 the rate is RPI (4.1% for 2026/27). It climbs to RPI plus 3% (7.1%) at incomes of £52,885 or more. A cap holds the headline rate at 6.0% for the year.
Does the interest rate actually matter?
For most graduates, no. Plan 2 loans are written off 30 years after repayments start, and repayments are 9% of income over the threshold, not a rate that clears the debt. If you are never going to repay the full balance before write-off, the interest is added to a debt that gets cancelled anyway, so the rate changes nothing you actually pay.
Who does the interest rate matter for?
Higher earners who will clear the whole balance before the 30-year write-off. For them, interest is real money on top, and a lower rate or an overpayment can save. The overpayment tool works out which side of that line you are on.
Why is my balance going up even though I am repaying?
Because the interest added each year can be more than your 9% repayments, especially early in a career on a modest salary. The balance rising looks alarming, but it only matters if you were going to repay in full, which most people do not.
What is the 6% cap?
A rule that stops the Plan 2 interest rate rising above 6.0% for the year, even when RPI plus 3% would be higher. It applies to the year to 31 August 2027 and can change, so the headline rate is the lower of the income-based rate and the cap.