Eligible borrowers with qualifying federal Direct Loans have until December 31, 2026, to enroll in auto pay for a temporary 1-percentage-point interest-rate reduction. The U.S. Department of Education says the reduction is scheduled to run through June 30, 2028, as long as borrowers remain enrolled and meet the program’s eligibility rules.
Who can get the temporary interest-rate reduction?
The Department says the benefit applies to qualifying Federal Direct Loans originated after July 1, 2012, and includes eligible student and parent borrowers. It is not a universal discount for every federal or private student loan. Check your loan type and origination date in your servicer account, and confirm your individual eligibility with the servicer.
The temporary reduction is 1 percentage point. Before July 1, 2026, the traditional auto-pay reduction was 0.25 percent; the Department describes the new temporary benefit as 1 percent. The Department’s September 29, 2026 announcement says borrowers already enrolled in auto pay were included and had their rates automatically adjusted after the benefit was announced.
How to enroll by December 31, 2026
- Sign in to your federal student loan servicer’s account.
- Choose the auto-pay or automatic-payment option.
- Enter the bank account information for the checking or savings account from which payments will be deducted.
- Review and confirm the payment amount and settings, then verify enrollment in your account.
Auto pay authorizes the servicer to deduct payments from your bank account. Enrollment is through the servicer, not a separate application for the rate reduction. Keep checking your account for the enrollment status, payment settings, and the interest rate shown on your loans. The Department’s announcement does not establish that every servicer applies or displays the adjustment on the same timeline.
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The deadline applies both to borrowers who still need to enroll and those already enrolled. The Department says eligible borrowers who enroll by December 31, 2026, and existing enrollees can receive the temporary reduction through June 30, 2028, while they remain enrolled and satisfy the eligibility requirements.
What if your loans are in default?
The Department says borrowers in default must first consolidate eligible loans and apply for a new repayment plan. They may qualify for auto pay after their loans return to good standing and they meet the program criteria. Contact your servicer about the steps for your loans before attempting to enroll.
Auto pay does not choose a repayment plan
Enrolling in auto pay changes how payments are made; it does not by itself place you in a particular repayment plan. The Department’s July 1, 2026 fact sheet describes the Repayment Assistance Plan (RAP) as an income-driven plan with monthly payments based on income, an interest waiver on qualifying on-time payments, and a principal match. The Department’s RAP fact sheet provides plan context, not a claim that choosing auto pay enrolls you in RAP.
If you are comparing repayment options, consider the factors that affect your own situation:
- Eligibility: Which plans and benefits are available for your loans?
- Monthly payment: What amount would you owe under each option?
- Unpaid interest: How does each plan treat interest that your payment does not cover?
- Qualifying payments and discharge: What conditions apply to any payment-count or discharge features?
Confirm plan details and eligibility with your servicer before changing repayment arrangements.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the Department has reported
The Department reported that nearly 2 million borrowers had enrolled in auto pay since the benefit was announced. That is the Department’s figure, not an independently audited count in the cited sources. Under Secretary of Education Nicholas Kent said the enrollment was “helping borrowers reduce long-term interest accrual.” The Department has not quantified individual savings in its extension announcement: the interest avoided depends on a borrower’s balance and payment trajectory.
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