Trump's Student Loan Autopay Discount Is Back — Starting July 1

If you've got federal student loans, here's something worth knowing before July 1 rolls around.

The Trump administration just announced it's boosting the interest rate discount for borrowers who sign up for autopay — and the jump is significant. Auto pay has long offered a modest discount off borrowers' interest rate — .25 percentage points — but after millions of borrowers opted out during the long COVID repayment pause, with some making no payments for years, the nation's student debt portfolio swelled to $1.7 trillion. So the government is sweetening the deal to get people back on track.

Student loan borrowers who sign up for, or already use, auto pay will get a 1 percentage point discount on interest for two years, starting July 1. That's four times bigger than the old discount.

In plain terms: the department said it will temporarily increase its auto pay interest rate discount to one full percentage point — practically, that means an undergraduate borrower with a loan at the current 6.39% would see their interest rate drop temporarily to 5.39%.

If you're already on autopay, you don't have to do anything. Borrowers already enrolled in auto pay do not need to act — they will automatically receive the rate cut. If you're not enrolled yet, you have a window: the department says borrowers will have until Sept. 30 to sign up for auto pay and qualify for the two-year interest discount.

Now, let's be real about how much money we're actually talking. The interest rate discount is unlikely to save borrowers a significant sum, said higher education expert Mark Kantrowitz. "The financial benefit is minimal," Kantrowitz said — for instance, a $10,000 student loan with a 6.5% interest rate, cut to 5.5%, would save a borrower around $8 a month. So don't expect a life-changing windfall. But savings are savings, and there's another reason to care beyond the math.

The bigger reason the government is doing this: participation in autopay has cratered. In a call with reporters on Thursday, Undersecretary Nicholas Kent said that, back in 2019, roughly 83% of borrowers were enrolled in auto pay but that by late 2025, that participation rate had dropped considerably, to just 40% of borrowers. The administration wants people making consistent, on-time payments — and autopay is the most reliable way to do that.

There's also an important fine print moment here. For borrowers already enrolled in auto pay, the savings will be smaller — borrowers who currently use auto pay already receive an interest-rate discount of 0.25%, so the new reduction takes off just 0.75%. The full 1% cut is only for people who aren't already enrolled.

Also worth flagging: borrowers in default are ineligible until returning to good standing. If you've fallen behind, you'll need to consolidate your loans and get back into a repayment plan first.

This discount is landing right as a wave of bigger changes hits. July 1 ushers in a host of big new changes to the federal student aid world, including the introduction of two new repayment plans and controversial new caps on graduate student loans. That package includes new borrowing caps and repayment plans, including the Repayment Assistance Plan, which waives unpaid monthly interest — although some borrowers are still expected to face monthly payment increases of hundreds of dollars.

Bottom line: if you have federal student loans and you're not on autopay, it costs you nothing to enroll and it'll save you something — plus keep you on time, which matters more than ever with these changes coming. Just don't wait past September 30.