Student loan interest rates to be capped at 7.3% from September

The interest rates used for many student loans are usually based on March's Retail Prices Index (RPI) measure of inflation and are usually confirmed in August. They had been expected to jump to 12%. However, the Department for Education has brought forward its announcement and says it has capped interest rates to a maximum of 7.3% for a year "to protect graduates from a rise in inflation".

This change won't affect borrowers' monthly payments but does mean some will now owe less than they would have done overall, had the rate increased to 12% as predicted.

'In practice, any financial gain is only for the highest earning graduates'

Student loan repayments are calculated by income rather than interest. If you're not earning, or earning less than the threshold for your loan, you don't pay anything back.

If you are making repayments, then unless you are a high earner and will pay back most or all of your loan before it's wiped (which happens 30 years after you leave university), the amount of interest added doesn't make a difference to the amount you'll repay.

See our How Plan 2 student loan interest works and Student loans mythbusting guides for more student finance need-to-knows.

Some student loan repayment thresholds were frozen in April and there'll be a new loan system for many starting university in 2023

A number of changes to the higher education funding system were already announced earlier this year. Here's a quick round-up with links to more information where relevant:

• As of 6 April 2022: Plan 2 repayment thresholds were frozen. The annual earnings threshold at which these borrowers start paying back their loans has been frozen at £27,295 until 2026/27, which adds around £113 a year to the total most will repay this year. 

• As of 6 April 2022: Postgraduate loan repayment thresholds were frozen. The annual earnings threshold at which these loans start being repaid was frozen at £21,000 a year into the 2022/23 financial year, meaning many university leavers will pay £87 a year more than they would have done.

• As of 6 April 2022: Plan 1 and Plan 4 repayment thresholds rose. The annual earnings threshold at which borrowers pay back Plan 1 loans increased from £19,895 a year to £20,195 a year. For Plan 4 loans the threshold rose from £25,000 a year to £25,375 a year. 

• For students starting university from September 2023, there's a new loan repayment plan. This will see students pay off their loans over 40 years instead of 30 and will cap the interest rate for repayments at the Retail Prices Index (RPI) rate of inflation. The loan repayment threshold for this new plan is set at £25,000 until 2025/26.