New autopay incentive offers federal borrowers a 1% interest cut until 2028

The Education Department is offering a limited-time incentive that raises the standard autopay interest discount from 0.25% to 1% for eligible federal student loans. To qualify, borrowers must have loans originated after July 1, 2012 and must enroll in the automatic payment program by Sept. 30, with the reduced rate remaining in effect through June 30, 2028. Under Secretary Nicholas Kent highlighted the goal of increasing repayment compliance and strengthening the overall loan portfolio.

Enrollment is cost-free and can be completed on a servicer’s website by providing banking details. While the discount can lower an example 6.39% rate to 5.39%, critics note that the monthly savings for smaller balances are modest, though larger loans stand to benefit more. Consumers are warned that autopay could trigger overdraft or insufficient-funds fees if account balances are not monitored.