Federal student loan borrowers have less than one month remaining to qualify for a temporary interest rate reduction that could lower their borrowing costs through mid-2028. Department of Education is offering eligible borrowers a 1-percentage-point interest rate reduction if they enroll in automatic payments by September 30. The department said this is designed to encourage on-time repayment as the Trump administration continues implementing its sweeping student loan overhaul.
This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time." The deadline is approaching as millions of borrowers adjust to new repayment plans and higher monthly bills under the Department’s changes that took effect on July 1. Student loan interest rates have become a growing concern for borrowers following broader reforms to the federal student loan system under the Trump administration. Interest rates on newly issued federal student loans currently range from roughly 6.5 percent to more than 9 percent, so even a 1-percentage-point reduction could translate into significant savings over time.
Borrowers who enroll in autopay by the end of September will receive a temporary 1 percentage point reduction in their federal student loan interest rate. The benefit became available July 1 and applies through June 30, 2028. Autopay allows loan servicers to automatically deduct monthly payments from a borrower's checking or savings account, reducing the risk of missed payments.
Federal borrowers have long been eligible for a 0.25 percentage point interest rate discount through autopay. But under the temporary program, the administration increased that benefit by an additional 0.75 percentage points, bringing the total reduction to 1 percentage point. However, not all borrowers are eligible.
Borrowers in default must first return their loans to good standing before receiving the benefit. The interest rate reduction also ends if a borrower enters deferment or forbearance. A graduate-level borrower with $50,000 in student debt at a 7.94 percent interest rate could save nearly $23 per month under the temporary reduction.
However, over the benefit's two-year term, those savings could add up to several hundred dollars. Autopay does just that, it automatically pulls the payment.” Experts say the benefit may be most valuable for borrowers focused on reducing their interest accumulation and paying down principal balances more quickly. The monthly payment itself is what is keeping many borrowers with student loans underwater.” Borrowers who sign up before the September 30 cutoff will keep the enhanced interest-rate reduction through June 2028, provided they remain enrolled in autopay and maintain their eligibility.
Extract — continue reading at the source.
