Federal Student Loans Now Offer a New Interest Rate Discount
1. What the new discount is
- Borrowers who enroll in autopay will receive a 1.0% interest rate reduction.
- This is a significant increase from the previous 0.25% autopay discount.
- Applies to borrowers with loans first disbursed on or after July 1, 2012.
2. When the discount applies
- Starts: July 1, 2026
- Ends: June 30, 2028
- Borrowers must be enrolled in autopay by September 30, 2026 to qualify.
- Those already enrolled in autopay automatically receive the discount.
3. Why the Department of Education is offering this
The Department of Education states the goal is to:
- Encourage on‑time payments
- Help borrowers reduce interest costs
- Improve repayment rates
- Support access to new repayment plans (RAP and Tiered Standard) launching July 1, 2026
- Strengthen the overall federal loan portfolio health
The Department estimates the program will cost $6 billion over two years.
4. How autopay helps borrowers
Autopay:
- Ensures payments are made on time
- Protects eligibility for PSLF and other forgiveness programs
- Helps borrowers in the new Repayment Assistance Plan (RAP) avoid interest growth through payment matching features
- Reduces the risk of delinquency or missed payments
Before the pandemic, 80% of borrowers in repayment used autopay; today only 40% do — a gap the Department hopes to close.
Key Takeaway for Borrowers
Enrolling in autopay now offers a full 1% interest rate reduction — a meaningful savings opportunity for millions of borrowers, especially those entering new repayment plans in 2026.
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