Student-loan borrowers have more time to receive a lower interest rate on their payments.
The Department of Education announced on Tuesday that it is extending the deadline for borrowers to enroll in autopay, and thus receive a 1-percentage-point interest rate reduction, to December 31, 2026.
The enrollment deadline was previously set for September 30.
The interest rate reduction is temporary and will last through June 30, 2028. The department said in a press release that since it first announced the benefit in June, nearly 2 million borrowers have enrolled.
“We are excited to see millions of borrowers take advantage of this temporary benefit, which is already driving up repayment rates and improving the overall health of the federal student loan portfolio,” Undersecretary of Education Nicholas Kent said in a statement.
Borrowers currently enrolled in autopay already receive a quarter-percentage-point reduction in their interest rate. Servicers will automatically reduce those borrowers’ interest rates by an additional three-quarters of a percentage point.
Borrowers who have defaulted are not eligible for the benefit until they return to good standing. The reduction applies to direct federal loans that originated after July 1, 2012. Interest rates on federal student loans disbursed after July 1 range from 6.5% to more than 9%, and borrowers have previously told Business Insider that the high rates have led to their balance growing beyond what they originally borrowed.
The department said in its press release that the benefit is designed to help borrowers make payments under its new Repayment Assistance Plan, which requires on-time payments. RAP was included in Trump’s repayment overhaul, which took effect on July 1, and is intended to be the more affordable income-driven repayment option for borrowers.
Still, borrowers have reported higher monthly bills under RAP following the elimination of the Biden-era SAVE plan, which offered lower monthly payments and a shorter timeline to debt relief.
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