The U.S. Department of Education announced an extension to the enrollment deadline for a temporary federal student loan interest rate reduction program. Borrowers now have until December 31 to sign up for automatic payments and qualify for the benefit, which was previously set to expire at the end of the day on Wednesday. Once enrolled, the interest rate discount will remain in effect through June 30, 2028.
According to department figures, nearly 2 million borrowers have already taken advantage of the program since it became available over the summer. The automatic payment arrangement provides a 1 percentage point reduction on eligible federal student loan interest rates, representing a significant benefit given that the current average interest rate on federal student loans stands at 6.54%, according to higher education analyst Mark Kantrowitz. The initiative comes at a time when more than 42 million Americans carry student loan debt totaling over $1.7 trillion.
Eligibility for the reduced rate is limited to borrowers with Direct Loan program loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans, as well as Parent PLUS borrowers whose loans originate from the Direct Loan program. Loans must have been disbursed on or after July 1, 2012, and must be in good standing. Federal Family Education Loans and private student loans do not qualify for the temporary discount.
Borrowers can enroll in automatic payments through their loan servicer’s website by navigating to payment management options and providing banking information. Those unsure of their loan servicer can locate contact details and account information through StudentAid.gov. According to Scott Buchanan, executive director of the Student Loan Servicing Alliance, the enrollment process is straightforward and typically takes minimal time to complete.
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