The Education Department announced Tuesday that it is pushing back the deadline for federal student loan borrowers to secure a 1% interest rate reduction, giving them until the end of 2026 to enroll in automatic payments.
Originally, borrowers had until Sept. 30 to apply for the discount, which was introduced earlier this summer as part of a broader effort to encourage auto-pay enrollment. The department said the extension comes just a day before the original cutoff, providing additional breathing room for those who haven't yet signed up.
How to get the 1% reduction
To qualify, borrowers must set up auto-pay through their loan servicer by the new deadline of Dec. 31, 2026. The department noted that only about 40% of borrowers were using auto-pay before the incentive was announced, but nearly 2 million more have enrolled since.
If you're already on auto-pay, you should be receiving the reduction automatically. Prior to July 1, the benefit was a smaller 0.25% cut. For those not yet enrolled, the process involves logging into your servicer account, entering bank details, and specifying payment amounts.
Borrowers in default must first consolidate their eligible loans through StudentAid.gov and apply for a new repayment plan before they can use auto-pay. Once enrolled, staying in the program and meeting all eligibility criteria—including having loans that originated after July 1, 2012—is required to keep the discount.
Additional benefits of auto-pay
Beyond the interest rate cut, auto-pay enrollment grants access to the Repayment Assistance Plan, a new option that matches on-time payments to prevent interest accrual and ensure balances decline monthly. On-time payments are also vital for those pursuing Public Service Loan Forgiveness.
Other changes affecting borrowers this summer
The extension comes amid a series of other policy shifts. The Biden-era SAVE plan, which offered some borrowers $0 monthly payments, was discontinued, and affected borrowers were notified in July to switch plans. Additionally, limits on Parent PLUS loans and graduate borrowing took effect, and for the first time, all borrowers now have a lifetime cap on federal loans.
The department's move reflects ongoing adjustments to the federal student loan system, which has seen significant upheaval in recent months. For more on related changes, see our coverage of the Title IX rule rollback and how it affects campus policies.
Borrowers are encouraged to act promptly to take advantage of the extended window, as the deadline is now firm for 2026.
