Federal student loan borrowers have until September 30 to enroll in automatic payments and lock in a temporary 1 percentage point interest rate cut that runs through mid-2028. The reduction, announced by the Department of Education, applies to Direct Loan borrowers, including both students and parents, whose loans originated after July 1, 2012.
The discount is made up of two parts: a standard 0.25 percentage point reduction that most servicers already offer for enrolling in auto pay, plus an additional 0.75 percentage point cut tied specifically to this program. Combined, that is a full percentage point off a borrower’s interest rate for two years, from July 1, 2026 through June 30, 2028.
Who qualifies, and what do borrowers need to do?
Borrowers already enrolled in auto pay do not need to do anything. The Department of Education says servicers will apply the extra 0.75 percentage point reduction automatically. Anyone not yet enrolled needs to log into their loan servicer’s account, opt into automatic payments, and confirm their bank account details before the September 30 deadline. Borrowers whose loans are currently in default have a slightly longer path: they need to log into StudentAid.gov, consolidate their eligible loans, apply for a new repayment plan, and then enroll in auto pay to qualify.
Under Secretary of Education Nicholas Kent framed the deadline as a straightforward opportunity for borrowers. “The Trump Administration is making student loan repayment easier than ever, and borrowers should not wait to take advantage,” Kent said in the department’s announcement.
What does a full percentage point actually save someone?
The exact dollar savings depend on a borrower’s loan balance and current rate, but a percentage point reduction on a typical federal loan balance can add up to real money over two years, both in interest paid and in a slightly lower minimum monthly payment. The department is pairing the announcement with the rollout of two new repayment options starting this year: the Repayment Assistance Plan and a Tiered Standard repayment plan, both intended to give borrowers more predictable monthly payments than some of the income-driven plans that have been tied up in litigation over the past few years.
Borrowers who miss the September 30 deadline are not permanently shut out of auto pay. They can still enroll afterward and get the standard 0.25 percentage point discount most servicers already provide. What they would miss is the extra 0.75 percentage point tied to this specific window, which the department has not indicated will be extended.
Anyone unsure whether their loans qualify, or who is unsure which servicer manages their account, can check directly through StudentAid.gov, which lists loan type, servicer and current enrollment status for federal borrowers.
Sources: U.S. Department of Education, “U.S. Department of Education Announces Student Loan Interest Rate Reduction” · Yahoo Finance, “September student loan deadlines you cannot miss”
