Student loan borrowers get until Dec. 31 to lock in a 1-point autopay rate cut
The Education Department extended its autopay discount deadline by three months; here is who qualifies and what it could save you.
The Education Department extended its autopay discount deadline by three months; here is who qualifies and what it could save you.
Federal student loan borrowers have three more months to lock in a lower interest rate. The U.S. Department of Education has extended the deadline to sign up for automatic payments and get a 1-percentage-point rate cut. The new deadline is Dec. 31, 2026.
The cut was first announced in June. The original deadline was Sept. 30.
## What changed
Borrowers who enroll in autopay by 11:59 p.m. ET on Dec. 31, or who are already enrolled, will get the lower rate through June 30, 2028, according to Federal Student Aid's servicer guidance on StudentAid.gov.
Autopay has long come with a 0.25-point discount. In June, the department added another 0.75 points, bringing the total to 1 point, according to its original press release. After June 30, 2028, the discount goes back to the standard 0.25 points.
"Nearly 2 million borrowers have enrolled in auto pay," Under Secretary of Education Nicholas Kent said in announcing the extension, according to the National Association of Student Financial Aid Administrators (NASFAA), which summarized the department's Sept. 30 announcement.
## Who qualifies
The discount applies to federal Direct Loans made on or after July 1, 2012. That includes loans for students and parent PLUS loans, according to the department.
Borrowers in default can qualify after they consolidate their loans through StudentAid.gov, pick a repayment plan and bring the loans into good standing, the department said. Borrowers who were in the now-ended SAVE plan and moved to another repayment plan are also eligible, Forbes reported.
To keep the discount, borrowers must stay enrolled in autopay.
## The math
Here is a simple example. These numbers are illustrative, not an average.
- A borrower owes **$30,000** in eligible federal loans.
- A 1-point cut is 1% of that balance: $30,000 x 0.01 = **about $300 less interest in the first year**.
- Compared with the old 0.25-point autopay discount, the extra 0.75 points is worth about $30,000 x 0.0075 = **$225 a year**.
Actual savings will be a little lower over time, because the balance shrinks as you pay it down. A lower rate does not always lower your monthly bill right away, but it means less interest builds up.
## Why the department is pushing autopay
Before the COVID-19 pandemic, more than 80% of borrowers used autopay. Today only about 40% do, according to the department's June announcement.
Officials have framed the discount as a way to help borrowers as they move into new repayment plans. Millions of borrowers have had to choose new plans after the Biden-era SAVE plan ended following legal challenges from Republican-led states, Newsweek reported.
## The caveats
Consumer advocates warn that borrowers on autopay still need to watch their accounts, Forbes reported. Servicers can change monthly payment amounts when a borrower switches plans or when income-based payments are recalculated each year. That can lead to an unexpectedly large withdrawal.
## What it means for you
If you have federal student loans made after mid-2012 and you are not on autopay, you have until Dec. 31 to sign up and get the full 1-point discount through mid-2028.
To enroll, log in to your loan servicer's website, select "auto pay" and enter your bank information, according to the department. If you are already enrolled, you do not need to do anything. The servicer applies the discount automatically.
If you do not know who your servicer is, you can find it by logging in at StudentAid.gov.