Student Loan Borrowers Get 3 More Months to Claim an Interest Rate Break

KEY TAKEAWAYS

• The Department of Education extended the deadline for borrowers to receive an interest rate reduction on their student loans to Dec. 31.

• Eligible borrowers who enroll in autopay by the deadline will have their interest rate reduced by one percentage point through June 30, 2028.

• Borrowers must have taken out their loans after July 2012 and be in good standing under a valid repayment plan.

Student loan borrowers now have more time to qualify for an interest rate reduction.

Student loan borrowers had until Sept. 30 to enroll in autopay to receive a temporary interest rate reduction. On Tuesday, the Department of Education extended that deadline to Dec. 31.

Borrowers who sign up for autopay through their student loan servicer account before the end of the year will see a 1-percentage-point cut until June 30, 2028.

Those who were already enrolled in autopay when the program was announced should already see their reduced interest rate, the Education Department said in the press release.

Why This Matters

An interest rate reduction lowers borrowers’ monthly payments, as most borrowers pay their principal balance and any accrued interest each month.

To be eligible for the interest rate reduction, borrowers must have student loans taken out after July 1, 2012, and be currently in repayment. That means they cannot be in delinquency, default, or in a payment pause such as forbearance or deferment.

The extension gives borrowers in default (those who have missed payments for over 270 days) another chance to become eligible. Defaulted borrowers can apply for a loan consolidation and have their loans brought back into good standing within four to six weeks.

Borrowers in the now-defunct Saving on a Valuable Education plan must move to another repayment plan before becoming eligible for the reduction. The Federal Student Aid’s Loan Simulator allows borrowers to compare monthly payments under the existing repayment plans. Borrowers can use the simulator to find and apply for the best repayment plan for them.

Since the Education Department announced the interest rate cut in June, nearly 2 million borrowers have enrolled in autopay.

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