Do you qualify? Trump administration will reduce interest on student loans
The Trump administration announced it will temporarily reduce interest on some federal student loans. We tell you who qualifies
This Thursday, President Donald Trump's administration announced a measure that will help the economy of some people with federal student loans: a temporary reduction in interest rates. Only, like any government initiative, not everyone can qualify. Certain requirements must be met to take advantage of this benefit.
The Department of Education reported that the reduction will be one percentage point in the interest rate. However, only borrowers who meet the qualification criteria for this measure will be able to obtain it.
“The Trump administration is making it easier than ever to pay off student loans, and borrowers should not wait to take advantage of this temporary interest rate reduction to stay current on the key benefits of their student loans,” Deputy Secretary of Education Nicholas Kent said in the statement. “This interest rate reduction will help them consider new affordable payment plans and pay off their loans on time.”
According to official figures, the federal student loan portfolio has skyrocketed to almost $1.7 trillion. That's not the problem; What is really affecting the funds provided by the government is that millions of borrowers are having difficulty making payments.
Additionally, the temporary one-percent reduction comes as 10.3% of student loans were delinquent during the first quarter, representing the highest percentage in six years and a twenty-fold increase since mid-2024, according to data from the Federal Reserve Bank of New York.
Who can receive the reduction?
Education authorities indicated that the benefit is aimed at those who received federal direct loans after July 1, 2012 and are enrolled in the automatic payment system or decide to register.
This means that many borrowers will have to complete some paperwork before accessing the discount. In some cases, existing loans will even need to be consolidated.
Currently, only 40% of borrowers use automatic payment, so the government hopes that more people will sign up thanks to this incentive.
It should be noted that those who are already enrolled in automatic payment will have a lower net benefit. This is because they currently already get a 0.25% reduction in their interest rate. For this reason, the new measure will represent an additional reduction of 0.75%.
What happens if you are behind on your payments?
The situation is different for those who are already in default. According to official figures, nearly 9 million borrowers have defaulted on payments for at least nine months.
To access the interest reduction, these people must first regularize their situation. Typically, this involves consolidating the loans and applying for a new payment plan.
Until when will it be available?
The word “temporary” in the measure leaves a small margin of time to access the reduction. The Department of Education indicated that it will remain in force until June 30, 2028.
In addition, the Trump administration is preparing other changes to the student loan system that will begin to apply on July 1. These include new limits on how much money students will be able to borrow and changes to some repayment options.
It seems like a one percentage point reduction isn't much of a benefit to adding autopay to your account. However, keep in mind that when we talk about interest rates, the charges accumulate and make a small debt unpayable. A -1% on your student loan could not only mean the possibility of paying off your debt, it could also save you hundreds or thousands of dollars over the life of the loan and over the entire term.