The deadline for student loan borrowers to receive them a lower interest rate is fast approaching.
Borrowers who enroll in autopay before the end of the day on September 30 will receive a temporary benefit A 1 percentage point reduction on the interest payments on their student loans, effective immediately.
The benefit, which went into effect July 1 for borrowers who already had an autopay plan, runs through June 30, 2028.
A borrower would realize modest savings over a two-year period: A graduate program borrower with $50,000 in student loan debt and an interest rate of 7.94% could save almost $23 per month.
Autopay allows student loan servicers to automatically debit a borrower’s monthly payment from their bank account. Borrowers currently enrolled in autopay receive a quarter of a percentage point reduction in their interest rate. With the temporary benefit, their service provider will reduce the rate by another three-quarters of a percentage point. Those who are already registered borrowers need not proceed further take action to receive the benefit.
Borrowers who default will not be eligible for the benefits until they are back in good standing, and if a borrower goes into forbearance or forbearance, the interest rate reduction ends. The reduction applies to direct federal loans disbursed on or after July 1, 2012.
Undersecretary Nicholas Kent said in a statement that the Department of Education expects the stimulus “will drive up repayment rates and significantly improve the overall health of the federal student loan portfolio.”
Interest rates on federal student loans disbursed after July 1 range from 6.5% to more than 9%. Lowering interest rates has received support from lawmakers; GOP Rep. Anna Paulina Luna posted on X that Congress should cap interest rates at 2%, and say that “Americans should be able to pay back what they borrow without paying for it twice.”
The benefit will come as the Ministry of Education implements this its refund revisionwhich came into effect on July 1. Borrowers will face higher monthly payments and a series of administrative errors as servicers implement the changes, including incorrect invoices and account statuses.
The department has said the changes are intended to simplify a complex reimbursement system and encourage colleges to reduce their tuition.
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