Sept. 30 deadline: enroll in auto pay for a 1-point student loan rate cut

Switching on auto pay by the end of Sept. 30 takes a full percentage point off the interest rate on federal Direct Loans made since July 2012, and the cut lasts through June 30, 2028.

Key points

• The cut is four times the usual 0.25-point auto-pay discount; borrowers already on auto pay had the extra 0.75 points applied automatically as of July 1 and need do nothing more.
• It applies to federal Direct Loans first paid out from July 1, 2012 onward; borrowers in default have to get back into good standing before they qualify.
• Business Insider's example: a graduate borrower carrying $50,000 at 7.94% could keep close to $23 a month.
• Moving into deferment or forbearance ends the discount; auto pay is set up in your loan servicer account (the Education Department's announcement walks through it), and the servicer then pulls each monthly payment from your bank account.

Why it matters

It reaches anyone repaying a federal Direct Loan first paid out since July 2012, which includes recent Penn State graduates and, as the Education Department's June 18 announcement spells out, parents who borrowed, not just students. Deferment or forbearance ends the cut, and that includes the in-school deferment servicers apply automatically when a borrower goes back to school at least half-time. For everyone in repayment, a full point off for roughly two years is a rate cut you get by switching on one setting at your servicer. It lands while the July 1 repayment overhaul is pushing many monthly bills up and servicers are still working through billing errors, so it is worth confirming the reduction actually shows on your statement. The window closes in under three weeks, and this is a discount on a bill you already owe, not an investment call.

This is an AI-written summary of the reporting credited above and the other sources linked in the text, read and edited by Nicholas before publishing. The facts and any quote belong to those sources; the wording is ours. Read the original.