The deadline for student-loan borrowers to receive a lower interest rate is fast approaching.
Borrowers who enroll in autopay by the end of the day on September 30 will receive a temporary 1-percentage-point reduction on their student-loan interest payments, starting immediately.
The benefit, which took effect July 1 for borrowers already enrolled in autopay, will last through June 30, 2028.
A borrower would see moderate savings over the two-year period: A graduate program borrower with $50,000 in student debt and a 7.94% interest rate could save nearly $23 a month.
Autopay allows student-loan servicers to automatically deduct a borrower’s monthly payment from their bank account. Borrowers currently enrolled in autopay already receive a quarter-percentage-point reduction in their interest rate. With the temporary benefit, their servicer will reduce their rate by an additional three-quarters of a percentage point. Those already-enrolled borrowers do not need to take any further action to receive the benefit.
Borrowers in default are not eligible for the benefit until they return to good standing, and if a borrower moves to a deferment or forbearance, the interest rate reduction will end. The reduction applies to direct federal loans disbursed on or after July 1, 2012.
Undersecretary Nicholas Kent said in a statement that the Department of Education expects the incentive will “drive up repayment rates and significantly improve the overall health of the federal student loan portfolio.”
Interest rates on federal student loans disbursed after July 1 range from 6.5% to over 9%. Lowering interest rates has garnered support from lawmakers; GOP Rep. Anna Paulina Luna posted on X that Congress should cap interest rates at 2%, saying that “Americans should be able to pay back what they borrowed without paying for it twice.”
The benefit comes as the Department of Education is carrying out its repayment overhaul, which took effect on July 1. Borrowers are navigating higher monthly payments and a range of administrative errors as servicers implement the changes, including incorrect bills and account statuses.
The department has said that its changes are intended to simplify a complex repayment system and incentivize colleges to lower their tuitions.
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