WASHINGTON (AP) — The Education Department on Thursday announced a reduction in interest rates for federal student loans, describing it as part of a plan to make higher education more affordable. With growing numbers of borrowers in default, the Trump administration pitched the temporary, 1% reduction in student loan interest rates as a salve for those struggling with repayment. Education Undersecretary Nicholas Kent said the change is a way of “making student loan repayment easier than ever” and of improving “the overall health of the federal student loan portfolio.”But the change does not apply to all borrowers, and those pursuing the reduction will need to meet eligibility criteria. Here are details of the plan and some context behind them:
Which borrowers are eligible for the rate reduction?WHAT THE DEPARTMENT SAID: The headline on the news release said: “U.S. Department of Education Announces Student Loan Interest Rate Reduction.” THE BACKSTORY: The change will only affect a subset of borrowers — those with federal Direct Loans issued after July 1, 2012, who are already enrolled in automatic payments or sign up for them.Many borrowers won’t see any immediate benefit. To qualify, they have to first take a set of actions including signing up for auto pay and, in some cases, consolidating their loans.
