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Student Loan Rates Drop 1% for Auto-Pay Users
19 Jun
Summary
- Interest rates on student loans will decrease by 1% for auto-payment users.
- This temporary reduction is available to borrowers who enroll by September 30.
- Two new repayment plans, RAP and TSP, launch on July 1.
The Education Department announced a significant benefit for federal student loan borrowers: a 1% interest rate reduction for those utilizing automatic payments. This temporary reduction will be effective from July 1 through June 30, 2028. Borrowers must enroll in auto-pay by September 30 of this year to take advantage of the offer. Currently, 40% of active borrowers use auto-pay, a decrease from over 80% before the pandemic. The department anticipates this measure will encourage timely repayments and strengthen the federal student loan portfolio.
In addition to the interest rate cut, July 1 will also mark the introduction of two new income-driven repayment plans: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan (TSP). These plans are being implemented to comply with the One Big Beautiful Bill Act. Borrowers previously enrolled in the Saving on a Valuable Education (SAVE) Plan, which is being phased out, can transition to RAP or TSP. New caps on graduate and professional school loans also take effect on July 1.
