The U.S. Department of Education announced a temporary 1% reduction in interest rates on certain federal Direct Loans, effective July 1, in a bid to make repayment more manageable for borrowers facing high balances and default pressures. Education Undersecretary Nicholas Kent said the change is intended to improve “the overall health of the federal student loan portfolio.” Eligibility is limited to borrowers with Direct Loans issued after July 1, 2012 who are enrolled in automatic payments or sign up for them. For borrowers already on autopay, the effective benefit is smaller because they already receive a 0.25% interest-rate discount—making the net savings 0.75%. The policy runs through June 30, 2028 and is part of a broader effort to raise autopay participation, currently at 40%. With nearly 9 million borrowers in default, the department also emphasized that most borrowers would first need to return to good standing—often through consolidation and selecting a new repayment plan.