Federal student loan borrowers who sign up for autopay will receive a 1 percentage point interest rate reduction starting July 1, 2026.
The Trump administration announced the expanded discount on June 18, extending it through June 30, 2028.
The move is designed to encourage borrowers back into active repayment after years of pandemic pauses and legal battles.
How the Discount Works
The standard autopay discount for federal student loans was previously 0.25 percentage points.
The new policy raises that to a full 1 percentage point for the two-year period through June 2028.
Borrowers already enrolled in autopay receive the expanded discount automatically starting July 1.
Borrowers not yet enrolled have until September 30, 2026 to sign up and qualify for the full two-year benefit.
CNBC reported that an undergraduate borrower with a 6.39 percent loan rate would drop to 5.39 percent under the expanded discount.
Why So Few Borrowers Are Currently Enrolled
The US Department of Education says only 40 percent of borrowers in active repayment are enrolled in autopay today.
Before the pandemic, that figure exceeded 80 percent. The payment pause allowed millions to cancel autopay.
Many borrowers forgot to re-enroll when repayment restarted, or encountered technical issues with loan servicers.
The new 1 percent discount creates a concrete financial incentive to re-enroll before the September deadline.
NPR reported that the administration framed this as an incentive for repayment, distinct from broader student debt relief programs.
How Much Borrowers Will Save
On a $30,000 loan balance at 6.39 percent, a 1 percent reduction saves roughly $300 per year in interest.
Over the two-year discount period that amounts to approximately $600 in total interest savings.
Graduate borrowers with larger balances save proportionally more. A $100,000 balance saves about $1,000 per year.
These savings matter more than usual given that the wholesale inflation rate hit 6.5% in May 2026, eroding household budgets across the country.
How to Sign Up for Autopay
Log in to your loan servicer’s website or StudentAid.gov to enroll in autopay before the September 30 deadline.
You will need a valid bank account with a stable balance to avoid NSF fees that would offset the interest savings.
The discount applies to Direct Loans, FFEL Loans held by the Education Department, and Perkins Loans the Department services.
The US Department of Education published the official announcement with complete eligibility criteria and enrollment instructions.
Context: SAVE Plan and Ongoing Loan Landscape
The autopay discount is a separate benefit from income-driven repayment plans like SAVE, which remains in legal limbo.
Borrowers on the SAVE plan have had interest pauses but face uncertainty about the plan’s future.
The autopay discount applies regardless of repayment plan, making it one of the simplest ways to lower borrowing costs right now.
The Juneteenth federal holiday means loan servicer offices are closed today, but online enrollment through StudentAid.gov is available 24 hours a day.
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