U.S. Education Department offers temporary student-loan rate cut through autopay

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Student-loan rate cut via autopay

Highlights

Federal student-loan borrowers who enroll in or are already using autopay by September 30 receive a one percentage point interest-rate reduction through June 30, 2028.
Servicers will apply a total one-point rate cut to autopay users, adding to the existing quarter-point discount, but borrowers in default are ineligible until returning to good standing.
The temporary rate cut coincides with President Donald Trump’s July 1 student-loan overhaul, which introduces new borrowing caps and repayment options but may increase monthly payments for some borrowers.

Autopay incentive and eligibility

As reported by the U.S. Department of Education, federal borrowers who enroll in autopay by September 30, or who are already enrolled, receive a one percentage point interest-rate reduction through June 30, 2028.

Borrowers already using autopay do not need to take any action, and their loan servicers will apply an additional three-quarters of a percentage point reduction on top of the existing quarter-point discount. Borrowers in default are not eligible for the benefit until they return to good standing.

Autopay allows servicers to automatically deduct monthly student-loan payments from a borrower’s bank account. The department said the temporary reduction is intended to support on-time repayment as borrowers evaluate new repayment options.

Repayment overhaul and borrower impact

Federal student-loan interest rates currently range from 6% to nearly 9%, and elevated rates have been a major driver of rising balances when borrowers miss or cannot keep up with monthly payments.

In a statement, Undersecretary of Education Nicholas Kent said the interest-rate reduction helps borrowers consider affordable repayment plans while improving the health of the federal student-loan portfolio. The department also said a graduate borrower with $50,000 in student debt at a 7.94% rate could save nearly $23 per month over the two-year period.

The announcement comes weeks before President Donald Trump’s student-loan repayment overhaul takes effect on July 1. That package includes new borrowing caps and repayment plans, including the Repayment Assistance Plan, which waives unpaid monthly interest, although some borrowers are still expected to face monthly payment increases of hundreds of dollars.

Our earlier article on an Education Department glitch in income-driven repayment applications explained that some federal student-loan borrowers were mistakenly shown $50 monthly bills instead of their true payment amounts. We noted the issue was resolved and servicers were expected to notify affected borrowers, but the confusion came at a sensitive time as Trump administration student-loan changes taking effect July 1 could raise monthly payments for some borrowers.

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