Education Department Cuts Student Loan Rates 1% for Auto Pay Through 2028
Updated
Updated · US Department of Education · Jun 18
Education Department Cuts Student Loan Rates 1% for Auto Pay Through 2028
3 articles · Updated · US Department of Education · Jun 18
Summary
July 1 marks the start of a temporary 1 percentage point interest-rate cut for federal student loan borrowers in auto pay, with eligibility for current enrollees and those who sign up by Sept. 30, 2026.
The incentive runs through June 30, 2028 and lifts the existing 0.25% auto-pay discount by another 0.75%, while borrowers must stay enrolled to keep the lower rate.
Loans originated after July 1, 2012 qualify, including parent borrowers; borrowers in default can get the benefit after restoring loans to good standing, and former SAVE enrollees must choose a legal repayment plan from July 1.
The department said auto-pay participation has fallen to 40% from more than 80% before the pandemic, and it expects the richer discount to raise on-time repayment and improve the federal loan portfolio.
The move coincides with two new repayment options launching July 1 under the Working Families Tax Cuts Act: the income-driven Repayment Assistance Plan and a Tiered Standard plan with 10-, 15-, 20- or 25-year terms.