Education Department cuts student loan interest rate
Key takeaways
- The reduction will be in effect through June 30, 2028.
- Borrowers who use auto pay already receive a 0.25-percentage-point reduction on their interest rates.
- The department noted that before the COVID-19 pandemic, more than 80 percent of student loan borrowers actively paying off their loans were enrolled in auto pay.
Why this matters: political developments that affect policy direction and public trust.
The reduction will be in effect through June 30, 2028. In order to benefit, borrowers must enroll in auto pay by Sept. 30 of this year — if they are not enrolled already.
Borrowers who use auto pay already receive a 0.25-percentage-point reduction on their interest rates. The Education Department noted those borrowers do not have to take any action to receive the full-point decrease, as their servicer will automatically reduce their rate by an additional 0.75 percent.
The department noted that before the COVID-19 pandemic, more than 80 percent of student loan borrowers actively paying off their loans were enrolled in auto pay. But as of Thursday, 40 percent of those borrowers use that payment method.