Low-interest loans for education expenses

The landscape for affordable study finance in 2025/26

Student finance is changing, but not in ways that should unsettle you. For 2025/26, the UK is prioritising lower, more predictable borrowing costs linked to inflation, with safeguards that keep repayments proportionate to earnings. That makes this a favourable year to fund education without overextending.

The headline is straightforward: Plan 5 undergraduate loans set for new English and Welsh students carry interest at the Retail Prices Index, currently 3.2%, with no added margin. Repayments start from April 2026 and only once your income passes £25,000. If you borrowed under older schemes, you are not forgotten either. Plan 1 loans are capped at a maximum 3.2% or less if market conditions fall, protecting long-term affordability. Plan 2 loans flex between 3.2% and 6.2% depending on your income after graduation, and postgraduate loans are capped at up to 6.2%, again with caps that track broader market rates to avoid overcharging.

Understanding APR is not just about percentages - it is about what you will pay in real terms. Inflation-linked interest and income-contingent repayments mean your monthly contributions adjust to what you earn. At the same time, tuition fee loans outside Northern Ireland now stretch to £9,535, covering the full fee at many providers so you do not have to pay upfront. For Northern Ireland students studying locally, the maximum fee loan is £4,855, reflecting different fee policy.

If you are weighing private credit alongside government support, the calculus is different. Government loans are designed to be flexible and protective; most commercial credit is not income-contingent and will expect fixed repayments regardless of your salary. As a UK-based retail finance broker, Kandoo helps customers compare responsible personal finance options for legitimate education-related costs that government loans do not cover, such as equipment, professional exams, or commuting. Used wisely, the right blend of public support and carefully chosen private finance can smooth cash flow through study and into work.

The right loan should feel sustainable today and still make sense when your circumstances change.

Who benefits from this guide

This guide is for UK-based students, recent graduates, and parents planning for fees and living costs in the 2025/26 academic year. It is especially relevant if you are starting an undergraduate course on Plan 5 in England or Wales, repaying an older Plan 1 or Plan 2 loan, or considering a postgraduate Master’s or Doctoral loan. It also helps those looking at practical alternatives when government support does not fully cover expenses, from books and laptops to professional accreditation costs.

Your practical choices at a glance

1. Plan 5 undergraduate loan - RPI at 3.2%, threshold £25,000, 9% above threshold.

2. Plan 2 undergraduate loan - RPI 3.2% to RPI+3% (up to 6.2%) based on income.

3. Plan 1 undergraduate loan - interest capped at 3.2% maximum or lower via market cap.

4. Postgraduate loan (Plan 3) - up to 6.2%, £21,000 threshold, 6% deduction.

5. Tuition fee loan - up to £9,535 outside Northern Ireland; £4,855 in NI for local study.

6. University hardship funds and bursaries - non-repayable support subject to eligibility.

7. Part-time work or internships - income to reduce reliance on borrowing.

8. Private finance for extras - Kandoo-brokered personal loans for uncovered costs.

What it costs and what it could mean for you

Do you qualify and on what terms

Eligibility differs by plan. New English and Welsh undergraduates typically enter Plan 5 from 2025/26, borrowing for tuition and maintenance if they meet residency and course criteria set by Student Finance. Repayments begin from April 2026 once earnings exceed £25,000, with deductions at 9% on income above that threshold. If you studied between 1998 and 2012 under the older scheme, you are likely on Plan 1, where the repayment threshold is £26,065 and the interest is capped at RPI - currently 3.2% - or lower if the Bank Rate plus 1% is less. Most students who started from 2012 to mid-2023 in England will be on Plan 2. Your interest after graduation ranges from RPI if you earn below £28,470 up to RPI+3% above £51,245, with monthly caps applied if market rates are lower.

Postgraduate Master’s and Doctoral loans sit on Plan 3, with a £21,000 threshold and a 6% deduction rate. Across Plans 2, 5 and postgraduate, interest caps are monitored monthly, aligning charges with prevailing commercial rates so you are not penalised if markets fall. Tuition fee loans can cover up to £9,535 for study outside Northern Ireland, while local NI fees are supported to £4,855. If you need help beyond government support, Kandoo can broker regulated personal loans for eligible UK applicants to fund legitimate education-related costs, subject to credit and affordability checks. Always confirm your residency, course level, and provider eligibility with the relevant national student finance body before applying.

From application to repayment in clear steps

1. Check your plan type and residency rules.

2. Estimate fees, maintenance and living costs.

3. Apply for student finance through your nation’s portal.

4. Confirm tuition fee coverage with your provider.

5. Set up a realistic term-time budget.

6. Explore bursaries and hardship funds early.

7. Consider Kandoo for uncovered essentials if needed.

8. Monitor earnings and repayment deductions on payslips.

Advantages and trade-offs

Read this before you commit

Borrow only what you need and model repayments at different income levels so you can see how deductions will feel in your take-home pay. If you are choosing between government support and private credit, prioritise income-contingent loans for core costs, then consider targeted private finance for essentials that improve study outcomes, such as a reliable laptop or professional travel. Remember that for 2025/26, thresholds are updated to protect low earners and interest is capped to mirror market conditions, but terms can shift over time. Keep records of communications from Student Finance and check payslips for correct deductions when you start work. If cash flow tightens, speak to your lender or employer payroll early rather than letting a small issue become a larger one.

Alternative ways to cover costs

1. University bursaries and scholarships tied to income or merit.

2. Hardship funds for urgent, unexpected expenses.

3. Part-time roles on campus or flexible gig work.

4. Family support or savings set aside for education.

5. Employer sponsorships or professional body grants.

6. Kandoo-brokered personal loans for specific, essential purchases.

Questions people ask most

Q: What is the interest on Plan 5 for 2025/26? A: Plan 5 is set at RPI, currently 3.2%, with no additional margin, and repayments start from April 2026 if you earn above £25,000.

Q: How do Plan 2 rates work after I graduate? A: Your rate ranges from RPI if you earn under £28,470 to RPI+3% above £51,245, with temporary caps if market rates are lower to avoid overcharging.

Q: What is the rate on older Plan 1 loans? A: Plan 1 loans have a maximum of 3.2% or lower if the Bank Rate plus 1% is less, and the repayment threshold is £26,065.

Q: Are postgraduate loans more expensive? A: Postgraduate loans can be up to 6.2%. Repayments are 6% of income above £21,000, so deductions start sooner, but caps help align with market conditions.

Q: Will tuition fees be fully covered? A: Tuition fee loans can cover up to £9,535 for study outside Northern Ireland and up to £4,855 for local study in Northern Ireland, paid directly to the institution.

Q: Can private finance be sensible alongside student loans? A: Yes, for specific essentials not covered by government support. Ensure affordability, as repayments are fixed and not income-contingent. Kandoo can help compare options responsibly.

Ready to move forward

If you are mapping out education costs, start by applying for the government support you are entitled to, then fill gaps carefully. Kandoo can help you compare responsible personal loan options for essential, education-related purchases, with a quick, no-obligation check that does not affect your credit score. When used judiciously, the right finance can keep your studies on track.

Important information

This guide is for general information, not financial advice. Student finance rules can change and vary by UK nation. Always check current terms with the relevant student finance body and consider independent advice before taking on credit.