AI Generated Image
The Trump administration says it is cutting student loan interest. Not everyone qualifies.
CBS News • • business
Key Points:
- The Education Department announced a temporary 1 percentage point interest rate reduction for certain federal student loan borrowers to ease repayment amid rising delinquencies, which hit 10.3% in the first quarter—the highest in six years.
- The reduction applies only to borrowers with federal Direct Loans issued after July 1, 2012, who are enrolled or enroll in automatic payments, aiming to increase auto pay participation beyond the current 40%.
- Borrowers already on auto pay will see a smaller benefit, receiving a 0.75% reduction instead of the full 1%, as they currently get a 0.25% discount.
- Nearly 9 million borrowers in default must rehabilitate their loans, often through consolidation and new repayment plans, to become eligible for the rate cut.
- The interest rate reduction is temporary and will last through June 30, 2028, coinciding with upcoming changes to borrowing limits and repayment options starting July 1 under the Trump administration.
