Want to save on student loan payments? Here's how to get a discount.
Summary
The U.S. Department of Education is offering a bigger interest rate discount on federal student loans for borrowers who sign up for automatic monthly payments by September 30. This discount lowers the loan interest rate by 1% instead of the usual 0.25% and lasts until June 30, 2028, helping borrowers reduce their payments.Key Facts
- Borrowers with federal student loans issued after July 1, 2012, can get a 1% interest rate discount by enrolling in automatic payments before September 30.
- Automatic payments take money directly from a bank account every month at no extra cost.
- Currently, about 40% of borrowers use automatic payments; the government wants to increase this to 80%.
- The discount reduces interest rates, for example, from 6.39% to 5.39% until mid-2028.
- To enroll, borrowers must log into their loan servicer website, provide bank details, and set up automatic payments.
- Risks include overdraft fees if there is not enough money in the bank account when payments are taken.
- The savings from the discount may be small for loans around $5,000 but bigger for average loan amounts near $40,000.
- About 9.5 million federal student loan borrowers are in default, meaning they are behind on payments by nine months or more.
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