Fact Check: Is Trump administration cutting student loan interest?

WASHINGTON, DC: Reports circulating online claim that the Trump administration has reduced interest rates on federal student loans to help borrowers struggling with repayment. 

The apparent announcement has drawn attention as millions of Americans continue to face student loan debt. However, questions remain about who qualifies for the reduction, how much borrowers will actually save, and whether the benefit applies to all federal student loans. So, let's fact-check the claim.

Claim: Trump administration announced interest-rate reduction for federal student loan borrowers 

According to the reports, the Education Department has announced a reduction in interest rates for certain federal student loan borrowers as part of the Trump administration's effort to make higher education more affordable and encourage loan repayment.

Officials presented the measure as a way to help borrowers manage their debt more easily at a time when millions of Americans are struggling with student loan payments, and nearly nine million borrowers remain in default.

Education Under Secretary Nicholas Kent reportedly said the measure aims to make student loan repayment easier and improve the overall health of the federal student loan portfolio, which has ballooned to almost $1.7 trillion. The Education Department also hopes the incentive will encourage more borrowers to sign up for automatic payments and reduce the number of missed payments. 

Fact Check: Partly true

The claim is partly true. The Trump administration did announce a temporary reduction in student loan interest rates, but the benefit is limited. As per the June 18, 2026, announcement, the interest-rate reduction will benefit borrowers with Federal Direct Loans issued after July 1, 2012, who are already enrolled in auto pay or who sign up for it.

To qualify for the interest-rate reduction, borrowers must take specific steps, including enrolling in auto pay and, in some cases, consolidating their loans. Currently, only about 40% of federal student loan borrowers use automatic payments, and the Education Department hopes the new incentive will encourage more people to enroll. 

To become eligible for the reduction, borrowers who are in default must get back in good standing by consolidating their loans and applying for a new repayment plan.

Education Department officials said eligible borrowers enrolled in auto pay can receive a 1% interest-rate reduction starting July 1. However, borrowers who already use auto pay currently receive a 0.25% interest-rate discount. As a result, the new policy will provide an additional reduction of 0.75% for those borrowers rather than a full 1% decrease.

"Borrowers who enroll in auto pay by September 30, 2026, or who are already enrolled, will benefit from the interest rate reduction through June 30, 2028," the announcement said.