Feds Offer a Way to Trim Your Student Loan Interest Rate

Student loan borrowers willing to let the government pull payments straight from their bank accounts are about to get a sweeter deal. Starting July 1, the Education Department will temporarily quadruple the usual auto-pay interest rate discount, from 0.25 to 1 percentage point (meaning, NPR reports, a borrower paying the current 6.39% rate would lower to 5.39%).

The bigger break will run for two years, through June 30, 2028, and applies to borrowers who enroll in auto pay by Sept. 30; those already signed up don't need to do anything to get the bigger discount. The New York Times reports the offer only applies to loans disbursed on or after July 1, 2012. DOE Under Secretary Nicholas Kent said the move, announced Thursday, is meant to "strengthen the overall health of the federal student loan portfolio," which stands at $1.7 trillion. Auto-pay participation has roughly halved in recent years, from about 83% in 2019 to 40% in 2025.