Student Loan Borrowers Can Cut Interest Rate by 1 Percent by Enrolling in Autopay Before September 30
The U.S. Department of Education is offering a temporary 1 percent interest rate reduction for federal student loan borrowers who enroll in automatic payments by September 30, 2026. The benefit applies to Direct Loans originated after July 1, 2012, and remains in effect through June 30, 2028.
Federal student loan borrowers can reduce their interest rate by 1 percent by enrolling in automatic payments before September 30, 2026.
The U.S. Department of Education announced the temporary incentive on July 1, 2026, as part of a broader effort to boost repayment rates. Autopay enrollment had dropped to 40 percent, down from over 80 percent before the COVID-19 pandemic.
The reduction applies to Federal Direct Loans originated after July 1, 2012, covering both student and parent borrowers. Borrowers already enrolled in autopay do not need to take any action. Their rate will be automatically adjusted to reflect the full 1 percent reduction, which includes an additional 0.75 percent on top of the standard 0.25 percent discount.
The benefit stays in place through June 30, 2028, as long as the borrower remains enrolled. If a borrower misses three consecutive payments due to insufficient funds, the autopay feature and the rate reduction are removed.
Borrowers currently in default must first bring their loans into good standing, typically by consolidating, before they can enroll. Borrowers previously on the now-defunct SAVE plan must select a new eligible repayment plan before enrolling.
The Department of Education also introduced the Repayment Assistance Plan as part of a broader shift in income-driven repayment options following the 2025 One Big Beautiful Bill Act, which ended the grad PLUS loan program for new borrowers.
