US announces a cut in student loan rate by 1%: Green card holders gain, but what about F-1 students?

The new Tiered Standard repayment plan will offer fixed terms of 10, 15, 20, or 25 years based on a borrower’s total outstanding loan balance, giving borrowers with higher debt lower monthly payments and more time to repay.

Auto pay is the easiest way for borrowers to ensure they maintain access to key benefits, including features of the Repayment Assistance Plan (RAP), which will also be available beginning July 1.

For example, borrowers in RAP can receive a match on their on-time payments to ensure interest does not accrue and balances keep declining every month. Eligible borrowers making on-time, monthly payments can also qualify for Public Service Loan Forgiveness (PSLF), which discharges certain loans after 120 payments.

Under RAP, a borrower’s monthly payment is based on that borrower’s income and number of dependents. This provides borrowers with affordable monthly payments to ensure they can meet their repayment obligations.

Unlike existing IDR plans, RAP ensures that borrowers who make full, on-time monthly payments will be shielded from runaway interest and will make regular progress toward reducing the principal balance on their loan.

Before the COVID-19 pandemic, more than 80 percent of student loan borrowers in active repayment were enrolled in autopay, which ensures that borrowers make monthly, on-time payments. Today, only 40 percent are enrolled.

How to Enroll in ‘Auto Pay’

Auto pay is an optional feature where a borrower’s student loan servicer can automatically deduct their monthly student loan payment directly from their checking or savings account. Currently, if a borrower enrolls in autopay, servicers reduce a borrower’s interest rate by 0.25 percent.

Enrolling in auto pay is quick and easy

Borrowers who are not currently enrolled in auto pay must log in to their student loan servicer account and select “auto pay” from the navigation menu. Borrowers must enter their bank account information and confirm specific payment amounts.

Borrowers who are currently enrolled in auto pay do not have to take any action – their servicer will automatically reduce their interest rate by an additional 0.75 percent, bringing the total reduction on their federal student loans to 1 percent.

Borrowers who are in default – and thus are not currently in repayment – must log in to StudentAid.gov, consolidate their eligible loans, and then apply for a new repayment plan before enrolling in auto pay.

Borrowers will need to remain in autopay to continue to benefit from the interest rate reduction.

This is a fourfold increase from the existing 0.25% discount borrowers previously received for enrolling in auto pay. Borrowers already using auto pay will receive an additional 0.75 percentage point reduction automatically — they need to take no action.

Will It Help Indian Students?

The short answer: largely no — and here’s why.

This benefit applies only to federal student loans — meaning loans issued by the US government. Indian students studying in the US on F-1 visas are international students and are not eligible for US federal student aid or federal student loans under the Higher Education Act.

Most Indian students in the US fund their education through private loans from Indian banks or private US lenders, family savings, or scholarships. None of these falls under this announcement.

The only scenario where an Indian student could benefit is if they are a lawful permanent resident (green card holder) studying in the US. In that case, they would be eligible for federal loans and could benefit from this reduction.

Bottom line

This is good news for American borrowers, but Indian students on F-1 visas will not see any direct benefit. Green card holders of Indian origin who have federal loans should enroll in auto pay before September 30, 2026, to lock in the savings through June 2028.