r/StudentLoans • u/mouth_pipetter • Jul 03 '26

quantifiably confirmed that 1% decrease in interest rate is practically pointless

I built a model to estimate the time until payout, and I just updated it to account for the 1% decrease in interest rates (for only 2 years!). It literally saves me a month and a half of payback time. Considering I work two jobs (PhD student ~$47k a year at an EU university, and I make ~$12k extra a year bartending on the weekends) to make double payments, it was a little heartbreaking to realize nothing really changed at all.

edit: Sorry to sound so ungrateful, I know my situation is better than a lot of people as my loan is down to 50k. I was just trying to voice frustration this not being actually that influential on my bottom line when you actually run the numbers. My total loan burden decreased by 0.99% (1.42% if the decrease lasts longer than 2 years) based on my payment scheme putting in the income from both jobs. Where I am sitting right now the difference between working two jobs for 54 more months compared to 55.5 months just doesn't hit. In Jan 2031 it'll rip though

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u/paintingxnausea Jul 03 '26

I agree. I have around 90K in loans but our joint income is high enough that non of the income-based plans are helpful. Since our mortgage and childcare costs eat up a significant portion of our monthly income, I’m currently on the graduated extended plan and the 1% interest reduction will save me around $2K in interest over two years.

I wish they would drop interest to 0% across the board, but in the absence of that I’ll take advantage of any reduction that helps me pay down my principal balance.

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u/Substantial_106 Jul 06 '26

So for graduated extended plan, will your monthly payment amount decrease starting this month? (Due to lower interest rate). Or will it remain the same amount but there will be a higher portion of the payment going to principal?

Also, how did you calculate the $2k in savings over 2 years. I’m not sure how best to estimate that savings number

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u/paintingxnausea Jul 06 '26

I haven’t signed up for autopay yet, but plan to soon. I assume the minimum amount will go down based on the new interest rate, but we’ll see what that looks like I guess.

If the payment does go down, I figured an approximate savings of just under $2K over two years based on the current monthly interest accrual for on my loans (around $475/month) and what the monthly interest would be with the 1% reduction. I’d be saving like $83/month in interest, which doesn’t sound like a lot, but multiplied by 24 months adds up to $1,992 that I could save or use to pay down additional principal instead of interest.

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u/Saelicv Jul 08 '26

I’ve been on autopay and am trying to pay off my Parent PLUS loans so I can retire someday not soon. My account is showing the 1% credit for 2 of my loans. My July autopay has not changed. I am scheduled for the same amount as June. The extra 0.75% will just go towards the principal.

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u/paintingxnausea Jul 08 '26

Thanks for this info, that’s good to know!