The outstanding federal student loan balance totaled over $1.6 trillion in February, with nearly 43 million student borrowers holding loan debt.
The Education Department announced on Thursday a 1 percent reduction in federal student loan interest rates for borrowers enrolled in automatic payments starting next month.
The interest rate reduction will apply to student loan borrowers who are already enrolled in autopay or who enroll by Sept. 30, and will take effect from July 1 through June 30, 2028, according to the department’s statement.
Autopay is a payment method that automatically deducts the monthly student loan payment from a borrower’s checking or savings account.
Borrowers enrolled in autopay already receive a 0.25-percentage-point reduction in student loan interest rate. Starting next month, they will automatically receive an additional 0.75 percentage-point reduction on the 1 percent reduction, the department said.
At present, only 40 percent of student loan borrowers use autopay to repay their loans, compared with more than 80 percent before the COVID-19 pandemic, according to the department.
Nicholas Kent, the under secretary of Education, said the temporary reduction is expected to boost repayment rates and improve the overall health of the federal student loan portfolio.
“The 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,” Kent said in the statement.
“No matter your age or college credential, we want to make sure that borrowers can understand their options and choose a repayment option that works best for them,” he said.
To enroll in autopay, borrowers have to log in to their student loan servicer account and select the payment method from the navigation menu. They will then need to enter their bank account information and confirm the payment amount.
The department said that eligible student loan borrowers who make on-time monthly payments may also qualify for Public Service Loan Forgiveness, which discharges certain loans after 120 payments.
The outstanding federal student loan balance totaled over $1.6 trillion in February, with nearly 43 million student borrowers holding loan debt, according to the Education Data Initiative.
