WHAT YOU NEED TO KNOW
  • Federal student loan borrowers now have until the end of the year to enroll for a temporary 1 percentage point interest rate reduction.
  • Nearly 2 million borrowers have enrolled in automatic payments since the discount became available over the summer.
  • Eligible loans must come from the Direct Loan program, have been disbursed on or after July 1, 2012, and remain in good standing.
  • The discount lasts through June 30, 2028, while FFEL loans and private student loans remain excluded.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Federal student loan borrowers now have until the end of the year to enroll in automatic payments and qualify for a temporary interest rate reduction. The Trump administration announced the deadline extension on Tuesday, replacing a cutoff that had been set for the end of the day Wednesday.

Borrowers who successfully enroll can receive a reduction of 1 percentage point on their interest rate. Once activated, the benefit will remain available through June 30, 2028.

The offer has already drawn substantial interest from borrowers seeking to reduce the cost of their federal debt. Nearly 2 million federal student loan borrowers have enrolled in automatic payments since the discount became available over the summer, according to the Education Department.

Automatic payment programs have typically provided borrowers with an interest rate discount of 0.25 percentage point. The temporary program therefore offers a larger reduction to eligible borrowers who enroll before the extended deadline.

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The stakes are considerable across the student loan market. More than 42 million Americans hold student loans, while total outstanding debt exceeds $1.7 trillion.

The current average interest rate on federal student loans is 6.54%, according to higher education expert Mark Kantrowitz. Eligibility for the temporary discount depends on the type of loan, its disbursement date, its standing and whether the borrower enrolls in automatic payments.

Kantrowitz said the debt must come from the Direct Loan program to qualify. Eligible categories include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.

Parent PLUS borrowers can also receive the discount, provided their loans are part of the Direct Loan program, Kantrowitz said. The offer does not cover every form of education debt held by American borrowers.

With the Federal Reserve expected to keep interest rates unchanged this month, do you think interest rates should remain where they are instead of being cut?

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Federal Family Education Loans, commonly known as FFEL loans, are not eligible for the temporary reduced rate. Private student loans are also excluded because the federal government is providing the discount.

The timing of the original loan is another condition. Kantrowitz said eligible loans must have been disbursed on or after July 1, 2012.

Borrowers can check their loan disbursement dates through StudentAid.gov or by contacting their loan servicer. Their loans must also be in good standing before they can qualify for the reduced interest rate.

Enrollment takes place through the website of the company servicing the borrower’s federal loans. Scott Buchanan, executive director of the Student Loan Servicing Alliance, said borrowers should look for a tab labeled “manage payments” or something similar.

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The Student Loan Servicing Alliance is a trade group representing federal student loan servicers. Buchanan said borrowers will typically need to provide a bank account number and a few additional details when submitting the automatic payment request.

The enrollment process itself should be brief once the required information is available. “It takes a minute,” Buchanan said.

Borrowers who do not know which company manages their federal student loans on behalf of the Education Department can obtain that information from StudentAid.gov. The federal website also provides contact information for the relevant servicing company.

The extension gives eligible borrowers additional time to review their loans, confirm their disbursement dates and establish automatic payments. Those who qualify and enroll by the end of the year can retain the 1 percentage point interest rate reduction through June 30, 2028.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.