Student-Loan Borrowers Have Until September 30 to Claim a Temporary 1-Point Interest Rate Cut: What You Need to Know

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Student-loan borrowers have until Sept. 30 to enroll in autopay and receive a temporary 1-percentage-point reduction in their federal student-loan interest rate.

The benefit is available through June 30, 2028, for eligible borrowers who enroll by the deadline or were already enrolled in autopay. The Education Department announced the temporary reduction in June as part of broader changes to federal student-loan repayment.

Borrowers who enroll in autopay normally receive a 0.25-percentage-point reduction in their interest rate. Under the temporary benefit, the department is adding another 0.75 percentage points, bringing the total reduction to 1 percentage point.

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Autopay allows loan servicers to automatically deduct monthly payments from a borrower's bank account. Borrowers who were already enrolled in autopay do not need to take additional action because their servicer will automatically apply the additional 0.75-percentage-point reduction.

The benefit applies to eligible Federal Direct Loans originated after July 1, 2012. Borrowers in default must first return their loans to good standing before they can receive the benefit. Borrowers must also remain enrolled in autopay to continue receiving the reduction.

The temporary incentive comes as borrowers adjust to a broader federal student-loan overhaul that took effect July 1. The changes introduced the Repayment Assistance Plan, or RAP, and the Tiered Standard Repayment Plan while phasing out the Biden-era Saving on a Valuable Education, or SAVE, plan for millions of borrowers.

The broader repayment overhaul has also raised questions about the accuracy of federal student-loan records. In August, the Education Department corrected a court filing after initially reporting that four borrowers in an ongoing lawsuit had most recently reported $0 in income. The department said technical problems with its National Student Loan Data System database had removed some older borrower income information.

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Under RAP, monthly payments are based on a borrower's income and number of dependents. The plan also provides protections against unpaid interest growing a borrower's balance when full, on-time payments are made. The Tiered Standard plan offers fixed repayment terms of 10, 15, 20 or 25 years based on the borrower's outstanding balance.