Millions of federal student loan borrowers have only days 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 temporary 1-percentage-point reduction in their student loan interest rate but only if they enroll in automatic payments by September 30. The Department of Education is offering the reduced interest rates to encourage borrowers to make on-time payments and improve the overall health of the federal student loan portfolio, officials say.
This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time. We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio.” Federal student loan borrowers must . The benefit will apply to eligible federal student loans originated after July 1, 2012.
Once enrolled, eligible borrowers will receive a full 1-percentage-point interest-rate reduction through June 30, 2028. Autopay removes one opportunity to miss a payment,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. For borrowers who can afford their payment, that should improve payment consistency at the margin.” Those not already enrolled can sign into their student loan servicer account and authorize automatic payments from a checking or savings account.
Still, Ryan said the autopay option will not solve the affordability crisis many borrowers are facing. It's realistically only going to create another problem,” Ryan said. Savings depend on a borrower's balance and interest rate.
A borrower with $50,000 in student debt and a 7.94 percent interest rate could save nearly $23 per month during the temporary reduction period. Experts say the interest rate drop could be particularly valuable for borrowers with large graduate school balances or Parent PLUS loans carrying relatively high interest rates. Getting those borrowers connected to a bank account allows payments to come in on a more established timeline, while also potentially getting some people who may be behind on payments to sign up because of this one-time change.” Interest rates on many newer federal student loans currently range from about 6.5 percent to more than 9 percent.
Not all borrowers will automatically qualify. Borrowers must generally be in repayment and in good standing to qualify. Those who are delinquent may regain eligibility by bringing their loans current or switching repayment plans and resuming payments.
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