Federal Student Loan Borrowers Can Cut Interest Rate by 1 Percent by Enrolling in Autopay Before September 30
The US Department of Education increased the autopay interest rate discount for federal student loans from 0.25 percent to 1 percent starting July 1, 2026. Borrowers must enroll by September 30, 2026, to lock in the benefit, which runs through June 30, 2028.
Federal student loan borrowers can reduce their interest rate by 1 percent by enrolling in autopay before September 30, 2026, the US Department of Education announced.
The benefit took effect July 1, 2026, and applies to Federal Direct Loans originated on or after July 1, 2012. The discount runs through June 30, 2028. Borrowers who miss the September 30 enrollment deadline will not qualify.
The change increases the existing autopay discount from 0.25 percent to 1 percent. Borrowers already enrolled in autopay do not need to take any action. Their loan servicers will automatically apply the additional 0.75 percent reduction.
For a borrower with a 40,000 dollar loan balance, the additional 0.75 percent reduction is estimated to save roughly 600 dollars in interest over the two-year period.
The Department of Education said the initiative is designed to encourage more borrowers to return to active repayment. Autopay enrollment dropped from more than 80 percent before the pandemic to about 40 percent in recent years.
The discount is contingent on staying enrolled in autopay. Borrowers who exit the program or have three consecutive returned payments due to insufficient funds may lose the benefit. The discount is also suspended during periods of deferment or forbearance.
The autopay change coincides with a broader overhaul of the federal student loan system that took effect July 1, 2026, under the One Big Beautiful Bill Act. That legislation ended the grad PLUS loan program for new borrowers and replaced several income-driven repayment plans with the new Repayment Assistance Plan.
Borrowers currently on the SAVE plan have a 90-day window to select a new repayment plan. The Department of Education has been notifying affected borrowers by email and through their loan servicers.
