Financial Aid News in Higher Education
The following information was written by Jeff Levy from Big J Educational Consulting and edited and revised by Jack O’Donnell.
U.S. Department of Education will lower interest rates on federal student loans by up to one percentage point for borrowers who enroll in automatic payments, starting July 1, 2026. This temporary reduction, which will last until June 30, 2028, aims to address the high default rates and encourage more borrowers to remain current on their loans. The incentive is tied to automatic payments that help borrowers pay on time. Currently, only 40.1% of borrowers in active repayment are enrolled in autopay. Borrowers already in autopay will receive an additional 0.75 percentage-point reduction, as they already benefit from a 0.25 percentage-point rate deduction. The rate reduction applies to loans disbursed after July 1, 2012.
Autopay is a feature available to all federal borrowers that allows the servicer to automatically debit their monthly student loan payment from their bank account. Borrowers currently enrolled in autopay receive a quarter-percentage-point interest rate reduction.
"This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time," Undersecretary of Education Nicholas Kent said in a statement. "We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio."
Whitman College has introduced its "10% Promise," an initiative that ensures annual tuition will not exceed 10% of a family's adjusted gross income. Unlike traditional financial aid formulas that consider multiple variables, Whitman's approach is straightforward, relying solely on a family's adjusted gross income as reported on FAFSA or a federal tax form. This promise applies to all students, regardless of economic background, and covers up to four years of attendance, with annual re-certification required through FAFSA. Adam Miller, Vice President for Admission and Financial Aid at Whitman, emphasized the college's commitment to reducing financial uncertainty and making college more accessible. Payment under this formula would forego the need to submit the CSS Profile. However, if submission of the CSS Profile yields a lower net cost, Whitman will honor the lower of the two pricing approaches.
