The United Kingdom announced on Tuesday its intention to cap the interest rates on millions of student loans at 6% from September 2026. London justifies this measure by the risks of inflation slipping linked to conflicts in the Middle East, which could suddenly increase the cost of loan for graduates.
The student loan system in England and Wales is the subject of strong criticism, and Prime Minister Keir Starmer pledged last February to explore ways to make it more equitable.
The government has been accused by some lawmakers, including within its own Labor Party, of exploiting graduates with inflated interest charges and unfavorable repayment terms.
The Ministry of Education clarified on Tuesday that the capping of so-called “plan 2” and “plan 3” loans would apply for the 2026/27 academic year. The move supplants the usual inflation-indexed formula, which allows rates up to the Retail Price Index (RPI) plus 3 percentage points.
A “FAILING” SYSTEM
The government said the intervention was necessary to protect borrowers from temporary inflation spikes caused by global shocks, arguing that graduates should not bear the additional debt costs resulting from the war.
“Capping the maximum interest rate on Plans 2 and 3 student loans will provide immediate protection to borrowers, supporting those who are most at risk within this already unfair system,” said Jacqui Smith, Minister for Skills in the UK. Ministry of Education.
She added that the government would continue to examine the plan 2 system, described as “failing”, in order to improve its fairness.
Most of the criticism focuses on plan 2 loans, taken out by students who started their course between September 2012 and July 2023. It is estimated that 5.8 million people hold these debts.
Tuition fees have been capped at 9,535 pounds ($12,657) in England and Wales for the current academic year.
Graduates with Plan 2 loans currently pay interest varying between RPI and RPI plus 3%, depending on their income. Students in plans 2 and 3 accrue interest at the RPI rate plus 3% during their studies.
If the debt is not repaid after 30 years, it is canceled.
(1 dollar = 0.7533 pounds)
