Student loan interest is added to your balance while you study and after you leave. How much interest you’re charged — and what it means for you — depends mainly on:
- which student loan plan you’re on
- whether you’re still studying
- and for some plans, how much you earn
For a lot of borrowers, interest is the reason their balance can go up even while they’re repaying. That can feel alarming — but it’s often completely normal in the UK system.
If you’re also trying to pin down when repayments actually start, read: When Do You Start Repaying Your Student Loan?
Quick answer (plain English)
- Interest is added daily (so your balance grows a little each day)
- The rate depends on your plan
- On Plan 2, the rate can change depending on your income after you leave
- Interest doesn’t directly change your monthly repayment (repayments are based on income)
- Many people won’t clear the full balance before it’s written off
If you’ve ever wondered whether you’ll actually pay it off, this is the next read: When Are Student Loans Written Off?
Why student loan interest feels weird (compared to normal debt)
With a normal loan, the goal is usually to clear the balance as fast as possible.
UK student loans don’t behave like that for most people. Your monthly repayment is set by your income, and the remaining balance may eventually be written off — which means:
- you can be repaying monthly and still see the balance rise
- the “total balance” matters less than people think
- what matters more is your income over time (and how long until write-off)
If you’re thinking about mortgages or credit scores, you’ll want this too: Do Student Loans Affect Your Credit Score or Mortgage?
Current interest rates (quick reference)
These are the headline rates used in the official guidance your site is based on:
- Plan 1: 3.2%
- Plan 4: 3.2%
- Plan 5: 3.2%
- Postgraduate Loan: 6.2%
- Plan 2: 6.2% while studying, then income-based after you leave (details below)
Rates can change over time (often around April), so treat this page as a clear guide — and check the current rate if you’re making a big decision like overpaying.
The most important thing to understand
Interest affects your balance — not your repayment calculation
In most cases, interest does not change what comes off your payslip each month.
Your monthly repayment is based on:
- your income
- your plan
- and whether your earnings are above the threshold
Interest mainly affects:
- whether your balance grows or shrinks over time
- whether you ever clear the balance before it’s written off
If you want the full “end game” explanation, read: When Are Student Loans Written Off?
How interest works by plan
If you’re on Plan 1
- Interest is typically lower than newer plans
- Many borrowers see the balance come down gradually if their repayments outweigh interest
Example (Plan 1):
James makes regular repayments and is charged a relatively low interest rate. Over time, his balance can reduce because his repayments tend to beat the interest being added.
If you’re on Plan 2
Plan 2 is the one that causes the most confusion — because the interest rate works differently while you’re studying and after you leave.
While you’re still studying
You’ll be charged 6.2% interest.
When the rate changes
The interest rate changes on 6 April, either:
- on 6 April after you finish or leave your course, or
- on 6 April 4 years after the course started if you’re studying part-time and your course is longer than 4 years
After that point, you’re charged interest based on your annual income:
| Annual income | Interest rate |
|---|---|
| £28,470 or less | 3.2% |
| £28,471 to £51,245 | 3.2%, plus up to 3% |
| £51,245 or more | 6.2% |
What “3.2%, plus up to 3%” means
If you’re in that middle band, your interest rate sits somewhere between 3.2% and 6.2%. In simple terms: as your income rises within that band, the rate tends to rise too.
Example (Plan 2):
Emma earns just above the repayment threshold. Interest is added to her balance, but her repayments are relatively small — so it’s common for her balance to grow for a while. That doesn’t mean she’s doing anything wrong. It’s just how Plan 2 works for many graduates.
If you’re unsure when deductions should start showing up on your payslip, go here: When Do You Start Repaying Your Student Loan?
If you’re on Plan 4
- The headline interest rate is 3.2%
- For many borrowers, this feels less aggressive than Plan 2
Example (Plan 4):
Mark earns below the repayment threshold, so he makes no repayments right now. Interest can still be added in the background, but it won’t affect his monthly take-home pay unless and until he earns above the threshold.
If you’re on Plan 5
- The headline interest rate is 3.2%
- The rules are set separately from older plans and can change over time
Example (Plan 5):
Sarah’s balance increases due to interest, but her repayments depend only on income — not the size of her balance. For some borrowers, the loan may be written off before the balance is ever fully repaid.
(If you’re already thinking “so will I ever pay it off?” — that’s exactly what this explains: When Are Student Loans Written Off?)
If you have a Postgraduate Loan
- The headline interest rate is 6.2%
- Postgraduate interest applies in addition to undergraduate loan interest (if you have both)
Example (Undergraduate + Postgraduate):
Tom has two loans accruing interest at the same time. Even if his total balance grows, repayments are still calculated based on income and plan rules — not the balance itself.
Should you worry if your balance keeps increasing?
Seeing your balance go up can be stressful — but for many borrowers, it’s normal.
A useful way to think about it is this:
- your repayments are income-based
- interest affects the balance
- and for many people, the balance is written off before it reaches zero
If you want the “what happens in the end” version, read: When Are Student Loans Written Off?
And if you’re worried about mortgages or lenders seeing your balance, read: Do Student Loans Affect Your Credit Score or Mortgage?
Where this information comes from
Student loan interest rates and rules are set by the government and administered by the Student Loans Company. Official guidance is available on GOV.UK.
What to read next
To understand the full picture, you may also find these helpful:
