Student loan borrowers get until Dec. 31 for autopay rate cut
Federal student loan borrowers now have until Dec. 31 to sign up for autopay and get a 1 percentage point cut in their interest rate, the Education Department says. The lower rate lasts through June 2028. The extension comes as defaults climb to 9.3 million borrowers.
The Education Department has given federal student loan borrowers more time to cut their interest rate. Borrowers who sign up for automatic payments by Dec. 31 get a rate cut of 1 percentage point, the Boston Globe and Scripps News reported. The first deadline was Sept. 30.
The lower rate lasts through June 2028. Borrowers who were already on autopay before the offer was announced in July got the cut automatically, the department said. Those borrowers already had a 0.25-point autopay discount, so the new deal adds 0.75 points for them.
There are catches. If a borrower cancels autopay or moves into forbearance, the rate cut ends, Scripps reported. Borrowers in default must first consolidate their loans at studentaid.gov before they can enroll. Consolidation usually takes about 60 days, and it can be done only once.
The offer is meant to help people keep up under the new Repayment Assistance Plan, which requires on-time payments. Nearly 2 million borrowers have signed up for autopay since the summer, the Globe reported.
"It's a pretty big benefit, especially for borrowers who have large balances," said Lesley J. Turner, a public policy professor at the University of Chicago.
Defaults keep rising. About 400,000 more borrowers fell into default this year, bringing the total to 9.3 million, according to Education Department data cited by WSOC-TV in Charlotte. That is nearly 1 in 5 borrowers. Tuesday was also the first deadline for people on the Biden-era SAVE plan, which ended in March, to switch to a new plan. Many could see higher monthly payments.
For now, the government is not forcing collections on defaulted loans, the Globe reported. Borrowers in default can also ask their loan holder about rehabilitation. After five on-time payments in that program, wage garnishment ends.
How to sign up: Log in to your loan servicer's website, choose autopay and enter your bank account details.
What we know: The autopay deadline is Dec. 31, and the cut lasts through June 2028.
What we don't: How many more borrowers will sign up before the deadline.
Where outlets agree The Boston Globe and Scripps News both report that borrowers who enroll in autopay by Dec. 31 get a 1-point rate cut lasting through June 2028.
Where they differ Outlets describe default differently, with the Boston Globe saying it starts at 270 days behind and WSOC-TV describing default accounts as at least 360 days late.