The reduction is estimated to cost $6 billion over the next two years.
Starting July 1, federal student loan borrowers who enroll in autopay will pay a lower interest rate on their loans over the next two years, the Education Department announced Thursday.
Currently, borrowers on autopay get a 0.25-percentage-point reduction, but now ED will knock a full percentage point off their interest rates.
The benefit will be given to those already signed up for autopay or who opt in to it before Sept. 30 of this year, Education Under Secretary Nicholas Kent told reporters on a call. It will expire June 30, 2028.
He said the benefit is available to those with loans that were first disbursed on or after July 1, 2012. The interest rate reduction will cost the department an estimated $6 billion, Kent said.
“This temporary incentive is designed to help borrowers pay down their balances more quickly, take full advantage of new repayment benefits, remain on track toward loan discharge opportunities and to strengthen the overall health of the federal student loan portfolio,” Kent said.