Trump Administration Quadruples Student-Loan Autopay Discount to Jumpstart Repayment

The Trump administration on Thursday announced a temporary but significant boost to the interest-rate discount available to federal student-loan borrowers who sign up for automatic payments, part of a broader push to restart repayment after years of pandemic-era pauses.

Under the new policy, borrowers enrolled in autopay will receive a full one-percentage-point reduction on their interest rate, beginning July 1 and lasting through June 30, 2028. That is a fourfold increase over the standard 0.25-percentage-point discount that autopay enrollees have long received, and the Education Department said it could translate into hundreds or even thousands of dollars in savings over the life of a loan.

The benefit is available to the vast majority of borrowers — anyone who took out federal loans on or after July 2012. Officials said loan holders who are not already enrolled in autopay have until Sept. 30 to sign up in order to qualify for the reduced rate. For a typical undergraduate borrower carrying a loan at the current 6.39% interest rate, the discount would temporarily lower the rate to 5.39%.

The move is aimed squarely at reversing a sharp decline in automatic-payment enrollment. The Education Department said only about 40% of borrowers in active repayment are currently signed up for autopay, down from more than 80% before the pandemic-era payment freeze took effect in 2020. Restoring autopay enrollment is seen as a way to reduce missed payments and delinquencies as millions of borrowers resume making payments.

The discount is one piece of a sweeping overhaul of the federal student-loan system the administration has been rolling out, which includes changes to repayment plans and renewed collection efforts on defaulted loans. Supporters argue the autopay incentive rewards borrowers who pay reliably while easing the financial strain of resumed payments.

Critics and some consumer advocates cautioned that the relief is temporary and modest compared with the broader debt loads many borrowers carry, and noted that enrolling in autopay requires a stable bank balance to avoid overdrafts. Still, for borrowers already planning to pay, the expanded discount offers a rare opportunity to cut their interest costs simply by automating a payment they intended to make anyway.