The reduction applies to eligible Federal Direct Loans and will remain available through June 30, 2028. The measure comes as borrowers adjust to changes in federal repayment programs and new requirements linked to the Repayment Assistance Plan (RAP).
Extension Gives Borrowers More Time to Access the Rate Reduction
According to the U.S. Department of Education, nearly 2 million borrowers have enrolled in auto pay since the benefit was announced earlier in 2026. Borrowers who enroll by the new deadline, as well as those already registered, can receive the temporary interest rate reduction until the program ends.
Before the temporary measure, borrowers enrolled in auto pay received a 0.25 percentage point interest rate reduction. The new benefit increases that reduction to 1 percentage point, with loan servicers automatically adjusting rates for eligible borrowers who were already enrolled.
The reduction applies to Direct Loans that originated after July 1, 2012. Borrowers in default are not immediately eligible, but they can qualify after returning their loans to good standing and meeting the program requirements.
According to the Department of Education, auto pay is also intended to help borrowers maintain on-time payments, which are required for access to certain features of the new repayment system. The department said the benefit supports borrowers returning to repayment while helping them remain eligible for programs connected to RAP, including payment-related benefits and potential Public Service Loan Forgiveness (PSLF) eligibility.
Borrowers who want to enroll must log in to their loan servicer account, provide bank information, and confirm their payment settings. Those who are unsure of their loan servicer can find the information through StudentAid.gov.
Borrowers Weigh Savings as Repayment Rules Change
The temporary reduction can lower the amount borrowers pay over time, depending on their loan balance, interest rate, and repayment period. USA TODAY reported that a borrower with a $10,000 loan at a 7% interest rate over 15 years would have a monthly payment of $89.88 without an auto pay reduction, compared with $84.39 with the temporary 1 percentage point reduction.
Financial experts cited by the same source said even a small interest rate change can affect repayment costs over the life of a loan. Ken Ruggiero, chief executive of private student loan lender Ascent, said borrowers should consider available savings opportunities when managing student debt.
The extension arrives during a period of adjustment for many borrowers following changes to federal repayment options. The Department of Education said the new Repayment Assistance Plan requires on-time payments and is designed as an income-driven repayment option.
Some borrowers have reported higher monthly payments after the end of the previous SAVE Plan, which offered different repayment terms. The Department of Education said borrowers who enroll in auto pay can better maintain access to repayment benefits that depend on consistent payments.
After June 30, 2028, the temporary 1 percentage point reduction will end, and the standard auto pay reduction of 0.25 percentage points will apply again. For eligible borrowers, the current extension provides additional time to enroll before the temporary benefit becomes unavailable.
