Story perspectives

Education Dept Cuts Autopay Rates 1% for 40 M borrowers

6/24/2026

Summary

Education Dept Rate-Cut

The U.S. Department of Education announced a 1-percentage-point rate cut for autopay borrowers.
The cut takes effect July 1 and runs through June 30, 2028.
New autopay enrollees receive the full 1-percentage-point reduction.
Existing participants keep a 0.25-percentage-point discount and must enroll by Sept. 30, 2026 if in default.
The program applies to Direct Subsidized, Unsubsidized, PLUS, Consolidation and Parent PLUS loans issued after July 1, 2012, and could lower payments for 40 million borrowers at 6.54% rate.

Summary

Education Dept Slashes

The Education Department estimates the two-year auto-pay rate cut will cost $6 billion.
Auto-pay enrollment fell from about 83 % in 2019 to 40 % by end-2025, according to Kent.
As of April, 9.16 million borrowers are in default, highlighting portfolio risk.
The Repayment Assistance Plan and Tiered Standard will launch on July 1.
Defaulted borrowers must consolidate and choose a legal repayment plan to get the discount.

Summary

Purcell Urges AutoPay

Dr. Jim Purcell, director of Alabama Commission on Higher Education, urges borrowers to enroll in Auto Pay to lock in rate cut.
He said confusion over loan-forgiveness programs caused a post-pandemic drop in Auto Pay use.
He noted that a soft job market and parental support leave many borrowers hesitant.
The Department of Education points borrowers to EdFinancial Services for enrollment.
Purcell called the cut “a start” to spur payments.

History

Historical Context

In 2005 the U.S. Department of Education and Federal Student Aid introduced an automatic-payment discount for federal student loans, saving borrowers $1.5 billion in year one. The move built on a shift toward payments, exemplified by debit cards rising from 9 % of U.S. purchases in 2001 to an expected 18.82 % by 2011. The 2026-2028 autopay cut to 1 % for 40 million borrowers follows that legacy, lowering defaults.

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Education Dept Rate-Cut

The U.S. Department of Education announced a 1-percentage-point rate cut for autopay borrowers.
The cut takes effect July 1 and runs through June 30, 2028.
New autopay enrollees receive the full 1-percentage-point reduction.
Existing participants keep a 0.25-percentage-point discount and must enroll by Sept. 30, 2026 if in default.
The program applies to Direct Subsidized, Unsubsidized, PLUS, Consolidation and Parent PLUS loans issued after July 1, 2012, and could lower payments for 40 million borrowers at 6.54% rate.

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