How do student tuition and maintenance loans work?
How do student tuition and maintenance loans work?
Starting in the 2026-27 academic year, the interest rate on certain student loans in England will be capped at 6%. This change will specifically affect Plan 2 loans and Plan 3 postgraduate loans, which will see the cap apply from September. While loan structures differ across Wales, Scotland, and Northern Ireland, most students still rely on borrowing to fund their education. The average graduate in England now owes around £53,000 upon leaving university.
Loan Plans and Repayment Terms
Students who began university in England between September 2012 and July 2023 hold Plan 2 loans, which are still issued in Wales. These loans require repayments of 9% on earnings exceeding £29,385, a threshold frozen by Chancellor Rachel Reeves in the November 2025 Budget. This means graduates will start repaying earlier than before, with higher income leading to larger monthly payments.
“The repayment threshold will remain at £29,385 from 2027 to 2030,” said Chancellor Rachel Reeves.
Plan 2 loans currently accrue interest based on the Retail Prices Index (RPI) plus up to 3% depending on earnings. This results in many graduates struggling to reduce their debts, which often exceed tens of thousands of pounds, even after years of repayment. The maximum interest rate for these loans is now 6.2%, set to drop to 6% in 2026-27.
Maintenance Loans and Eligibility
Student loans typically consist of two parts: tuition fees and maintenance support. The tuition fee element covers the annual cost of the course, with varying amounts across the UK. Maintenance loans are designed to cover living expenses, including accommodation, food, books, and equipment. These loans are means-tested, with payments based on household income. Additional funds may be available for students with disabilities or those caring for children.
Students who are under 25 and independent, such as those with no contact with their parents, can qualify as “estranged students.” This status excludes their parents’ financial situations from consideration. Research by the Higher Education Policy Institute (May 2024) found that in England, maintenance loans often cover only about half the cost of living, and even less for those studying in London.
Recent Changes and Future Adjustments
As of April 2026, over 20,000 students were informed they had been “mis-sold” their maintenance loans due to course ineligibility, requiring them to repay the funds. In 2025-26, undergraduate students in England and Wales may receive higher maintenance loans than in previous years. For example, the maximum maintenance amount for students from England living away from home outside London has increased to £10,544, up from £10,227.
The government is introducing maintenance grants of up to £1,000 annually for lower-income students in England enrolled in courses aligned with its Industrial Strategy. These grants will be available from 2028, though the list of eligible programs is still being finalized. Welsh students studying away from home can access up to £11,345 in maintenance loans, while Scottish under-25s receive £9,400. Northern Ireland students may qualify for £8,132 or £11,391 if studying in London.
From 2026, both tuition fees and maintenance loans will be adjusted using the Retail Price Index minus mortgage interest (RPIx). At the October 2025 rate, this measure would increase tuition fees by approximately £400 per year, pushing the maximum cost to over £9,900. The government claims only universities meeting quality standards will charge this top rate in England.
