A measure of inflation, which measures changes to the cost of living in the UK.
How do you calculate the interest to apply at the end of each month?
First we get the interest rate applicable to you. For Plan 1 and Postgraduate loans that is a set value and for Plan 2 loans we calculate the variable amount from the 3% and add it to the base RPI percentage. Let's call that x
Then we get the daily interest rate (remember interest is calculated daily and applied to your balance each month): y = x / 100 / 365
and finally we get the interest amount: amount = (((y + 1)^daysInTheMonth) - 1) * currentOutstandingDebt
As an example, let's say x is 5.6%:
y = 5.6 / 100 / 365 which is y = 0.00015342465, our daily percentage.
If the month we are calculating the interest to apply for has 30 days and the current outstanding debt is £40,000, the amount to be added is amount = (((0.00015342465 + 1)^30) - 1) * 40000 which is amount = 184.519747857, so about £184.