Want a lower interest rate on your student loans? Enroll in autopay.
On Thursday, the Department of Education announced that federal borrowers who enroll in autopay by September 30, or who are already enrolled, will receive a one percentage point interest-rate reduction through June 30, 2028.
The reduction provides moderate savings: A graduate program borrower with $50,000 in student debt and a 7.94% interest rate could save nearly $23 per month over the two-year period.
Autopay is a feature available to all federal borrowers that allows the servicer to automatically deduct their monthly student-loan payment from their bank account. Borrowers currently enrolled in autopay receive a quarter percentage point interest-rate reduction.
"This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time," Undersecretary of Education Nicholas Kent said in a statement. "We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio."
According to the department's press release, borrowers who are already enrolled in autopay do not need to take any action — their servicers will reduce their interest rate by an additional three-quarters of a percentage point. Borrowers in default are not eligible for the benefit until they return to good standing.
Interest rates on federal student loans range from 6% to nearly 9%. High interest rates have been a primary reason for surging student-loan balances; if a borrower does not maintain consistent monthly payments, their balances will grow due to interest, sometimes exceeding the amount they originally borrowed.
This announcement comes just weeks before President Donald Trump's sweeping student-loan repayment overhaul will take effect on July 1. The changes include new borrowing caps and new repayment plans, including the Repayment Assistance Plan, which waives unpaid monthly interest. Borrowers are expected to still see their monthly payments increase on that plan, some by hundreds of dollars.
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