Key facts
- Federal student loan borrowers can receive a 1% interest rate reduction by enrolling in autopay by September 30.
- Borrowers already enrolled in autopay will see their interest rate reduced by an additional 0.75 percentage points.
- The interest rate reduction is valid through June 30, 2028.
- The initiative aims to increase repayment rates and improve the federal student loan portfolio's health.
- Two new repayment plans, RAP and TSP, and new borrowing caps will be available starting July 1.
- The SAVE Plan is being eliminated on July 1.
The Department of Education announced that federal student loan borrowers can receive a 1% interest rate reduction by enrolling in automatic payments by September 30, or by already being enrolled. This reduction will be effective through June 30, 2028. Borrowers already using autopay, which provides a 0.25-percentage-point reduction, will automatically receive an additional 0.75% decrease. The department anticipates this measure will boost repayment rates and enhance the financial health of the federal student loan portfolio.
This initiative coincides with significant changes to student loan repayment set to take effect on July 1. These include the introduction of two new repayment plans, the Repayment Assistance Plan (RAP) and the Tiered Standard Plan (TSP), along with new caps on graduate and professional school loans, all in compliance with the One Big Beautiful Bill Act. Additionally, the Saving on a Valuable Education (SAVE) Plan, established under the Biden administration, will be eliminated on July 1 following a court order.