Top line
Federal student loan borrowers still have two days to sign up for automatic monthly payments and receive a temporary 1% interest rate reduction under a Department of Education. initiative this will reduce rates until June 2028.
Protesters march from the U.S. Supreme Court to the White House after the nation’s high court blocked President Biden’s student debt relief package, Friday, June 30, 2023.
Los Angeles Times via Getty Images
Key facts
Wednesday is the last day borrowers can sign up for the rate reduction by signing up for autopay, which automatically deducts payments from the borrower’s bank account on a set day each month.
Student and parent borrowers can sign up for autopay to receive the discount, which will last until June 30, 2028, but they must have loans issued after July 1, 2012.
Borrowers who already use autopay and received a 0.25% interest rate reduction will be automatically enrolled in the new 1% rate reduction.
The new cut, which was announcement during the summer, is one of the a multitude of changes to the federal student loan program included in the federal government’s “One Big Beautiful Bill” signed into law last year.
LARGE NUMBER
$600. That’s roughly how much a borrower with a standard loan of $30,000 and an initial interest rate of 6.5% will save over two years by receiving a 1% interest rate reduction.
HOW TO REGISTER FOR INTEREST REDUCTION ON A STUDENT LOAN
Borrowers can check their eligibility by logging into the federal student loan portal, either through studentaid.gov or through their loan servicer like Nelnet, MOHELA, Aidvantage or EdFinancial. For those whose loans were disbursed after July 1, 2012, signing up for automatic payments before 11:59 p.m. on Wednesday, September 30 will secure the 1% rate reduction through June 2028.
WHO IS ELIGIBLE?
Any borrower with a Direct Loan disbursed on or after July 1, 2012. Anyone with older Direct Loans, private non-federal student loans, or Federal Commercial Family Education Loans (FFEL) is not eligible. Those who have defaulted on their loans and are not in repayment, or who are still on the defunct federal SAVE plan, may be eligible but will need to apply for a new repayment plan before they can enroll.
Key context
The Trump administration dismantled the Biden-era Saving on a Valuable Education (SAVE) plan, rolling back accelerated pardon pathways and ending payment calculations based on lower income, and included a host of changes in its “One Big Beautiful Bill” spending plan. Starting July 1, 2026, the Department of Education streamlined federal repayment into just two main paths for new borrowers: a standard plan and the new Repayment Assistance Plan, which replaces income-based repayment plans and requires borrowers to make payments for 30 years, compared to 20 or 25 years in previous plans. Other changes to student loans include establishing new caps on federal student loans, adding new restrictions for Pell Grants, imposing new limits on loans in forbearance, eliminating the Grad PLUS loan program for new graduate borrowers, and removing rules that allowed borrowers to defer payments due to unemployment or economic hardship.
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