The Federal Student Aid office recently announced a temporary program that could save people with federal student loans hundreds of dollars per year.
To qualify, borrowers must have Federal Direct student loans taken out after Jul. 1st, 2012. and need to set up automatic payments[1].
Setting up auto-pay will grant eligible borrowers a 1% interest rate reduction on their loan.
For a new graduate who used loans to pay for school, the average federal student loan debt is approximately $40,000 per EducationData. The current interest rate for federal student loans sits at 6.52%[2]. The monthly student loan payment using the provided figures would be $454.60. Qualifying borrowers who enroll in auto-pay would have their rate reduced to 5.52% which would reduce the monthly by $20.10 and the annual savings would be over $240.
For graduate school loans, the average balance is approximately $95,000[3]. and the interest loan rate for Direct loans taken out since Jul. 1, 2026 is 8.07%. The average monthly savings is $50, totaling to approximately $600 in savings per year.
The deadline to enroll is Sep. 30, 2026, and the benefits will be active until Jun. 30, 2028.The process to set up autopay may vary by loan servicer. For additional information and links to common loan servicers, access the Student Aid website here.
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