Student loan borrowers face September 30 deadline for claiming 1% autopay discount
Your federal student loan servicer may owe you a rate discount you have not claimed, and the window to secure it closes on September 30, 2026.
The Department of Education announced on June 18 a temporary increase in the autopay interest rate reduction available to eligible borrowers starting July 1.
The discount is four times larger than the reduction that had been in place for years, yet most active borrowers have not activated it.
For borrowers who enroll before the September 30 deadline, the reduced rate applies through June 30, 2028, and activates once autopay begins.
Total federal student loan debt sat at roughly $1.7 trillion across about 45.3 million borrowers as of December 31, 2025, the Congressional Research Service reported, and the department wants more of them to repay consistently.
Department of Education quadruples the autopay discount to 1%
Before the pandemic paused federal student loan payments in 2020, more than 80% of borrowers in active repayment had autopay enabled on their accounts.
That participation rate has since fallen to 40%, which means most borrowers are now paying full interest on their loans, the department confirmed.
"We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio," Under Secretary of Education Nicholas Kent said in the department's June 18 announcement.
Kent said the Department will soon release official guidance to help borrowers transition out of the SAVE Plan and into a legal repayment option.
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"In the coming weeks, the Department will issue clear guidance on next steps for borrowers enrolled in the illegal SAVE Plan, including details regarding how borrowers can move into a legal repayment plan," Kent said.
The previous autopay discount reduced a borrower's interest rate by 0.25%, and the new temporary version increases that reduction to 1 percentage point.
Two new repayment plans also launch July 1, including the income-driven Repayment Assistance Plan and the Tiered Standard repayment plan, the department noted.
Which borrowers qualify for the 1% autopay rate reduction
The one-percentage-point discount applies to Federal Direct Loans originally disbursed after July 1, 2012, covering both student and parent borrowers with qualifying balances.
Borrowers on the Standard plan, an existing income-driven plan, or the new Repayment Assistance Plan all qualify, with no plan-based restrictions applied.
Anyone already enrolled in autopay will receive the extra 0.75% rate reduction automatically beginning July 1, the department's press release noted.
How much the autopay discount saves over 2 years of repayment
A borrower who has $30,000 in federal loans at the current 6.39% undergraduate rate would see that figure drop to 5.39% under the expanded discount.
On a $40,000 balance, the extra 0.75 percentage points alone would save a borrower roughly $600 in interest over the two-year discount window, The College Investor estimated.
A $10,000 balance with a rate drop from 6.5% to 5.5% saves roughly $8 per month, higher education expert Mark Kantrowitz told CNBC.
"The financial benefit is minimal," Kantrowitz said, but he noted borrowers should still enroll because "they are less likely to be late with a payment."
A lower rate also channels a larger share of each monthly payment toward principal, which reduces total interest costs over the full loan term.
A note for SAVE plan borrowers
Borrowers still enrolled in the now-defunct Saving on a Valuable Education plan face an additional requirement before they can claim the expanded autopay discount.
A court order eliminated the SAVE plan on March 10, 2026, and servicers will begin notifying affected borrowers about the termination starting on July 1.
Those borrowers will then have 90 days to select a replacement plan before being automatically assigned to the Standard or Tiered Standard plan.
Affected borrowers should switch plans promptly because each month spent without qualifying payments is time lost toward forgiveness, Betsy Mayotte, president of The Institute of Student Loan Advisors, told PBS News.
Defaulted student loan borrowers must return to good standing first
Borrowers whose federal loans are in default cannot access the expanded autopay discount, a restriction that affected roughly 7.8 million people as of December 2025, according to Department of Education data summarized by the Congressional Research Service.
Default status begins after 270 days of missed payments and triggers severe collection consequences, including wage garnishment of up to 15% of disposable income, the income left after mandatory deductions such as taxes.
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To regain eligibility, those borrowers can consolidate their loans into a Federal Direct Consolidation Loan through StudentAid.gov and then choose a qualifying repayment plan.
Once consolidation restores their accounts to good standing, they can enroll in autopay and access the rate reduction before the September 30 deadline.
How to activate autopay before September 30
Enrolling in autopay requires logging into your loan servicer's website, navigating to the automatic payments section, and entering your bank account information.
Borrowers switching to the new Repayment Assistance Plan on July 1 have until September 30 to activate autopay, providing time to confirm updated payment amounts.
That three-month gap allows borrowers to verify the correct monthly amount with their servicer before the automatic withdrawal begins to pull from their bank account.
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This story was originally published June 23, 2026 at 11:47 AM.