Education Department to Cut Student Loan Interest Rates for Auto-Pay Borrowers

Borrowers enrolled in automatic student loan payments will receive a temporary 1% interest rate reduction beginning July 1, while the department is urging others to enroll by Sept. 30 to qualify.

By yourNEWS Media Newsroom

The Department of Education will temporarily lower interest rates for student loan borrowers who use automatic payments, offering a 1% reduction beginning next month.

The department announced Thursday that borrowers already enrolled in auto-pay do not need to take additional steps. Their interest rates will automatically be reduced by 1% starting July 1.

The temporary reduction will remain in place through June 2028.

“The Trump Administration is making student loan repayment easier than ever, and borrowers should not wait to take advantage of this temporary interest rate reduction to stay on track for key student loan benefits,” Nicholas Kent, under secretary of Education, said in a statement. “No matter your age or college credential, we want to make sure that borrowers can understand their options and choose a repayment option that works best for them.”

Kent encouraged borrowers who are not currently enrolled in automatic payments to sign up by Sept. 30 if they want to qualify for the interest rate benefit.

Auto-pay allows a student loan servicer to automatically withdraw a borrower’s monthly payment from a checking or savings account. The department said the feature is optional but can help borrowers remain current on payments and receive the temporary rate reduction.

Before the COVID-19 pandemic, more than 80% of student loan borrowers who were actively repaying their loans were enrolled in auto-pay, according to the department. That share has since fallen to 40%.

The rate cut is part of the department’s effort to move more borrowers back into regular repayment and help them manage loan obligations after years of pandemic-era disruptions and changing repayment rules.

The department has also urged borrowers currently enrolled in the Biden administration’s “Saving on a Valuable Education” plan to select a new repayment plan by Sept. 29.

As of March, 7.5 million borrowers remained enrolled in that program, according to the department.

Borrowers already using auto-pay will receive the reduction automatically July 1. Those not enrolled must sign up by the Sept. 30 deadline to receive the temporary 1% rate cut.