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WASHINGTON, DC – The U.S. Department of Education (the Department) extended the enrollment period for the 1 percent interest rate reduction benefit by an additional three months. Borrowers who enroll in auto pay by December 31, 2026, or those who are already enrolled, will benefit from the interest rate reduction through June 30, 2028.
Since the Department announced the interest rate reduction earlier this summer, nearly 2 million borrowers have enrolled in auto pay, helping ensure they make their monthly payments on time. This temporary benefit is designed to support borrowers, including those returning to repayment, while ensuring they can access key benefits under the new Repayment Assistance Plan (RAP) that requires on-time payments.
“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.”
Enrolling in auto pay is the easiest way for borrowers to ensure they maintain access to key benefits, including features of the income-driven RAP. For example, borrowers in RAP can receive a match on their on-time payments to ensure interest does not accrue and balances decline 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. Auto pay helps ensure borrowers never miss a monthly payment, which is a prerequisite for accessing these repayment and discharge benefits.
How to Enroll in Auto Pay
Auto pay is an optional feature that lets a borrower’s student loan servicer automatically deduct the monthly student loan payment directly from their checking or savings account. Before July 1, 2026, if a borrower enrolled in auto pay, servicers reduced a borrower’s interest rate by 0.25 percent. The 1 percent interest rate reduction is a temporary benefit available to borrowers who enroll in auto pay by the end of the calendar year.
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.
- All borrowers that were previously enrolled in auto pay when the extension was first announced have had their interest rate automatically adjusted to the 1%.
- 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 must remain in auto pay and meet all eligibility criteria while enrolled in auto pay to continue to benefit from the interest rate reduction.
The additional interest rate reduction will benefit all borrowers whose Federal Direct Loans originated after July 1, 2012, including student and parent borrowers who are currently enrolled in auto pay; borrowers who are not yet enrolled in auto pay; and borrowers who are enrolled in the now-defunct SAVE [Saving on a Valuable Education] Plan, who have enrolled in a different, lawful repayment plan. This benefit will also be available for borrowers who are currently in default once they bring their loans back into good standing.
How to Apply for an Income-Driven Repayment Plan
Applying for an income-driven repayment (IDR) plan is easy and efficient when borrowers provide consent for the Department to obtain their federal tax information (FTI) directly from the Internal Revenue Service (IRS). This allows the Department to process a borrower’s IDR application faster and eliminates the need for a borrower to manually upload their income information.
Information source: US Department of Education
