Federal student loan borrowers who have auto-pay set up can pay 1% less in interest each month through 2028, the Education Department announced Thursday, offering some relief to borrowers as major changes to the student loan repayment process take effect.
A U.S. Department of Education sign is displayed outside of the agency's federal student aid office on June 3 in Washington, DC.
Borrowers will be eligible to have their interest lowered by 1% on their monthly student loan payments starting July 1, if they are already enrolled in auto-pay—which automatically deducts payments from a borrower’s bank account—or enroll in it before Sept. 30.
The rate cut will last until June 30, 2028, and borrowers who have loans that originated after July 1, 2012, are eligible.
Both student and parent borrowers can enroll in auto-pay, but those who have defaulted on their loans and are not in repayment, or are still on the defunct federal SAVE plan, will have to apply for a new repayment plan before they can enroll.
