The U.S. Department of Education has extended the enrollment period for federal student loan borrowers to receive a temporary 1% interest rate reduction by enrolling in automatic payments.
Borrowers now have until December 31, 2026, to enroll in auto pay. Borrowers who enroll by the deadline, as well as those already enrolled, can receive the reduced interest rate through June 30, 2028, provided they remain enrolled in auto pay and continue to meet eligibility requirements.
The Department reports that nearly 2 million borrowers have enrolled in auto pay since the enhanced interest rate reduction was announced earlier this year.
“Following the Trump Administration’s announcement of the interest rate reduction earlier this year, nearly 2 million borrowers have enrolled in auto pay – helping borrowers reduce long-term interest accrual,” said Under Secretary of Education Nicholas Kent. “We are excited to see millions of borrowers take advantage of this temporary benefit, which is already driving up repayment rates and improving the overall health of the federal student loan portfolio.”
Who Is Eligible?
The temporary interest rate reduction applies to borrowers with Federal Direct Loans originated after July 1, 2012, including student and parent borrowers. It is available to:
- Borrowers currently enrolled in auto pay
- Borrowers who enroll in auto pay by December 31, 2026
- Borrowers previously enrolled in the SAVE Plan who have moved to another eligible repayment plan
- Borrowers currently in default once they take the necessary steps to return their eligible loans to repayment and meet applicable requirements
Before July 1, 2026, borrowers enrolled in auto pay generally received a 0.25% interest rate reduction. The temporary benefit increases that reduction to 1% for eligible borrowers.
How Borrowers Can Enroll
Borrowers who are not currently enrolled can sign in to their federal student loan servicer’s website, select the auto pay option, provide their bank account information, and confirm their payment amount.
Borrowers who were already enrolled in auto pay when the enhanced benefit was initially announced have had their interest rate automatically adjusted to reflect the 1% reduction.
Borrowers currently in default must first take steps to return their eligible loans to repayment. ED directs these borrowers to log in to StudentAid.gov, consolidate eligible loans, and apply for a new repayment plan before enrolling in auto pay.
Income-Driven Repayment Applications
ED is also encouraging borrowers applying for an income-driven repayment (IDR) plan to consent to the Department obtaining their federal tax information directly from the IRS. Providing consent can help expedite processing and eliminates the need for borrowers to manually upload documentation of their income.
Why Auto Pay Matters Beyond the Interest Rate Reduction
The Department is encouraging borrowers to use auto pay as a way to maintain consistent, on-time payments. This can be particularly important for borrowers seeking benefits tied to timely payments.
Key Dates
December 31, 2026: Deadline to enroll in auto pay to receive the temporary 1% interest rate reduction.
June 30, 2028: Scheduled end of the temporary enhanced interest rate reduction for eligible borrowers who remain enrolled and meet applicable requirements.