Deadline extended for student loan borrowers looking to reduce interest rates
Student loan borrowers now have until the end of 2026 to enroll in auto pay and have their interest rate reduced by 1%.The original deadline was Sept.30, but the U.S.
Department of Education extended it to give borrowers more time to enroll.The rate reduction will last through June 2028.Borrowers who currently use auto pay already receive an interest-rate discount of 0.25%, so the new reduction takes off just 0.75%.This temporary benefit is meant to support borrowers, along with those who are returning to repayment, and ensure they can stay on top of the new Repayment Assistance Plan that requires on-time payments, according to the Education Department.The interest reduction can benefit borrowers who have large balances and are on fixed payments, said Lesley J.
Turner, associate professor of public policy at the University of Chicago.“For a limited time, borrowers are now able to get a full percentage point reduction in their interest rate if they sign up for auto debit,” Turner said.“So this is a quadrupling of the earlier benefit.
It’s a pretty big benefit, especially for borrowers who have large balances.”Since the interest reduction was announced this summer, nearly 2 million borrowers have enrolled in auto pay.Around 9 million Americans are in default on their federal student loans as of June, according to the Education Department.Hundreds of thousands more are behind on loan payments and at risk of default this year.If you’re looking to enroll your student loans in auto pay, here’s what you need to know:In order to get the 1% interest reduction, you must enroll in auto pay by Dec.
31.First, log in to your student loan servicer account and select auto pay.You’ll need to enter your bank information to automatically withdraw the monthly payment from your checking or savings account.Even without the rate reduction, auto pay is a good way to stay on top of your student loans, Turner said.“We all know life gets busy and if you have to log in e...