Student Loan Borrowers Get Until Dec. 31 to Enroll for Lower Interest Rates

The U.S. Department of Education has extended the deadline for eligible federal student loan borrowers to enroll in automatic payments and receive a temporary one-percentage-point interest rate reduction.

Borrowers now have until December 31, 2026, to enroll, three months beyond the original September 30 deadline. The reduced interest rate will remain available through June 30, 2028, provided borrowers stay enrolled and meet eligibility requirements, according to the department’s September 29 announcement.

Nearly 2 million borrowers have signed up for automatic payments since the department announced the expanded benefit earlier this summer, the agency reported. Under Secretary of Education Nicholas Kent said the initiative is helping borrowers reduce interest accumulation and improving repayment rates.

The temporary discount increased the standard automatic-payment interest rate reduction from 0.25 percentage points to one percentage point beginning July 1, 2026. For example, an eligible loan with a 6% interest rate would carry a 5% rate while the full discount applies. The one-point reduction replaces the smaller discount rather than being added to it. Federal Student Aid’s repayment guidance confirms the change.

The department said eligible loans include Federal Direct Loans originated after July 1, 2012, covering both student and parent borrowers. Borrowers already enrolled in automatic payments have had their eligible interest rates adjusted automatically.

Borrowers who previously participated in the SAVE repayment plan must move into another eligible repayment plan before receiving the benefit. Those in default must first bring their loans back into good standing. The department identifies consolidation of eligible defaulted loans, followed by enrollment in a repayment plan, as a route to accessing automatic payments and the discount.

Automatic payments allow a loan servicer to withdraw the scheduled monthly payment directly from a borrower’s checking or savings account. To enroll, borrowers should sign into their servicer’s website, select the automatic-payment option, enter their banking information and confirm the payment amount.

The department also connected the enrollment extension to the new Repayment Assistance Plan, or RAP, which offers income-based payments and benefits tied to making required monthly payments.

According to Edfinancial’s RAP guidance, the plan subsidizes unpaid monthly interest when a borrower’s required payment is insufficient to cover it. The plan also includes a principal-payment matching benefit intended to help borrowers reduce their outstanding balances. These features are separate from the automatic-payment interest rate discount.

Automatic payments can also help borrowers keep up with payments toward Public Service Loan Forgiveness. However, enrolling does not establish eligibility for forgiveness. The program requires 120 qualifying monthly payments on Direct Loans under a qualifying repayment plan while working full time for a qualifying employer, according to Federal Student Aid.

For borrowers applying for an income-driven repayment plan, the department said consenting to the transfer of federal tax information directly from the Internal Revenue Service can speed application processing and eliminate the need to manually upload income records.