Student loan interest rate reduction offered through auto pay option starting July

The U.S. Department of Education announced Thursday that federal student loan borrowers enrolled in auto pay will be eligible for a 1% interest rate reduction beginning July 1, a change from the current 0.25% auto pay interest reduction rate.

Those who have federal student loans who are enrolled or who will enroll in auto pay by Sept. 30 will be eligible for the interest rate reduction through June 30, 2028, the department said.

“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," Under Secretary of Education Nicholas Kent said in a department news release.

“This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time. We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio," Kent said. 

Under the auto pay program, a borrower’s student loan servicer automatically pays the monthly student loan payment directly from the borrower's checking or savings account. Auto pay is an optional feature borrowers can enroll in. 

The process of enrolling is detailed here by the U.S. Department of Education.