Student loan auto-pay discount: Deadline extended to December 31, 2026

Student loan borrowers now have until the end of 2026 to enrol in auto-pay and receive a 1% interest rate reduction, after the U.S. Department of Education extended the original September 30 deadline.

The rate of reduction will last through June 2028, giving borrowers more time to take advantage of the temporary benefit. The extension aims to support borrowers returning to the Repayment Assistance Plan, which requires on-time payments.

Borrowers already enrolled in auto-pay will automatically qualify for the reduced rate, provided they remain in good standing. Those who were enrolled before the announcement in July have already had their interest rates reduced by 1%. However, the discount ends if auto-pay is cancelled or the loan enters forbearance.

The initiative is part of broader changes under the One Big Beautiful Bill Act (OBBBA), effective July 1, 2026, which introduced new borrowing limits and streamlined repayment plans for federal student loans. 

The OBBBA also eliminated the Grad PLUS loan program and set new limits for graduate and professional student loans.

According to the Department of Education, nearly 2 million borrowers have enrolled in auto-pay since the reduction was announced this summer. Around 9 million Americans were in default on federal student loans as of June.

Borrowers in default must consolidate their loans through studentaid.gov to qualify for auto-pay. The consolidation process usually takes about 60 days, and borrowers can only consolidate once. 

Experts encourage borrowers to review their options and consult financial advisors to assess how these changes may impact their individual situations.