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The Department of Education announced Thursday that student loan borrowers enrolled in automatic payments will receive a temporary one-percentage-point reduction in their interest rates beginning next month.
According to the department, borrowers already participating in auto-pay repayment plans will automatically receive the reduced rate starting July 1, with no additional action required. The benefit will remain in effect through June 2028.
“This 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,” said Nicholas Kent in a statement.
Kent encouraged borrowers who are not currently enrolled in a repayment plan to sign up by Sept. 30 in order to qualify for the interest rate reduction.
The Education Department noted that participation in automatic payments has fallen significantly since before the COVID-19 pandemic. Prior to 2020, more than 80 percent of student loan borrowers actively repaying their loans were enrolled in auto-pay. The figure currently stands at approximately 40 percent.
Auto-pay allows student loan servicers to automatically withdraw monthly payments from a borrower’s checking or savings account, helping reduce missed payments and simplify repayment.
The announcement comes as the department continues encouraging borrowers enrolled in the Biden administration’s Saving on a Valuable Education (SAVE) plan to transition to a different repayment option. The department has advised SAVE participants to select a new repayment plan by Sept. 29.
According to federal data, roughly 7.5 million borrowers remained enrolled in the SAVE program as of March.
Education officials said the temporary interest rate reduction is designed to encourage repayment participation and help borrowers manage their student loan obligations while remaining current on their accounts.