Student loan borrowers have more time to cut their interest rate

By
FOX Local
Published October 6, 2026 3:16 PM CDT

The reality of college tuition debt was on display at the Northeastern University graduation at the TD Garden on May 03, 2019. (Photo by Suzanne Kreiter/The Boston Globe via Getty Images)

The Brief

    • People paying off their student loans have until December 31, 2026, to take advantage of an increased interest rate reduction.
    • Borrowers can lower their interest rate by 1% by enrolling in autopay, quadrupling the normal reduction.
    • The higher interest reduction lasts until June 30, 2028, for people who continue to make payments through that time.

Student loan borrowers currently making payments have a little more time to temporarily cut their interest rates. The federal government extended the deadline for them to shave a full percentage point off their interest rate by making their payments automatically.

Big picture view:

The U.S. Department of Education will let those borrowers who make their payments manually every month lower their interest rates for at least a year and a half by enrolling in autopay. The deadline to register was originally set for September 30 but has now been extended to the end of the year. 

What they're saying:

"Auto pay saves you time and money over the life of your federal student loan, and it helps you make sure your payment is on time every month," the Education Department wrote in a post on its website. 

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By the numbers:

The program, which has been in effect since July 1, 2026, allows borrowers to cut their interest rate by 1% by enrolling in autopay, quadrupling the 0.25% that individuals would normally save. The savings are not permanent, though. The Education Department pointed out that the increased interest rate reduction is scheduled to revert to the normal level on June 30, 2028.

Dig deeper:

To maintain the lower interest rate through June 2028, the borrower must have autopay activated the entire time and must continue to make payments. Any switch to forbearance or deferment would also end the rate reduction. 

What you can do:

Anyone who already had autopay set up is currently receiving the rate reduction, the Education Department noted. Those who want to enroll can do so through their loan servicer, the links for which are listed below.

The backstory:

The Associated Press reported that approximately nine million Americans have defaulted on their federal student loans, and hundreds of thousands more are at risk of defaulting this year.

The Source: Information for this article was taken from the U.S. Department of Education and the Associated Press. This story was reported from Orlando.

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