Want to save on student loan payments? Here's how to get a discount.

Federal student loan borrowers in the United States have an opportunity to reduce their interest rates by enrolling in an automatic payment plan. The U.S. Department of Education is offering a stepped-up interest rate discount of 1% for those who sign up for its automatic payment feature before the September 30 deadline. This enhanced incentive, double the standard 0.25% discount, is intended to encourage more borrowers to make timely payments and bolster the financial health of the federal student loan program.

Under Secretary of Education Nicholas Kent stated that this interest rate reduction will assist borrowers as they explore new, affordable repayment options. The department anticipates that this temporary incentive will boost repayment rates significantly. The 1% discount is available to borrowers with government loans issued after July 1, 2012, and will remain in effect until June 30, 2028, for those enrolled by the deadline.

“

This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time.

To enroll, borrowers must visit their loan servicer's website and provide their bank account details to set up automatic monthly deductions. While this feature can help avoid late fees, the Consumer Financial Protection Bureau (CFPB) warns borrowers to monitor their account balances carefully to prevent potential overdraft or nonsufficient funds fees. The Urban Institute also suggests that the financial benefits of the interest rate cut may be modest for some borrowers.

“

Automatic payments can help you avoid late fees on your bills. But if you forget to track your account balance and it's too low when a payment is due, you might have to pay overdraft or nonsufficient funds fees.