Tip of the Week

Student loan borrowers have an additional three months to enroll in auto pay and receive a one percent interest rate reduction benefit.

Auto pay allows the student loan servicer to automatically deduct the monthly student loan payment directly from the borrower’s checking or savings account.

On September 29, the Department of Education announced the extension of the enrollment period for the one percent interest rate reduction benefit by three months, allowing borrowers to enroll by December 31, 2026. Borrowers who enroll, or for those who have already enrolled, will benefit from the one percent interest rate reduction through June 30, 2028. Borrowers who enrolled in auto pay prior to July 1, 2026 had their interest rate reduced by .25 percent.

Almost 2 million federal student loan borrowers have enrolled in auto pay since the Department announced the initiative on June 18, 2026. The temporary benefit is designed to support borrowers and helps ensure that they make their monthly payments on time.

Enrolling in auto pay ensures that borrowers can access key benefits under the new Repayment Assistance Plan (RAP), which requires on-time payments. Borrowers in RAP can receive a match on their on-time payments to ensure interest does not accrue and balances decline every month. Eligible borrowers can also qualify for Public Service Loan Forgiveness (PSLF), which discharges certain loans after 120 payments.

Borrowers can easily enroll in auto pay:

• Borrowers who are not currently enrolled in auto pay must log in to their student loan servicer account and select “auto pay” from the navigation menu. Borrowers must enter their bank account information and confirm specific payment amounts. 
• All borrowers that were previously enrolled in auto pay when the extension was first announced have had their interest rate automatically adjusted to the 1%.   
• Borrowers who are in default – and thus are not currently in repayment – must log in to StudentAid.gov, consolidate their eligible loans, and then apply for a new repayment plan before enrolling in auto pay.  
• Borrowers must remain in auto pay and meet all eligibility criteria while enrolled in auto pay to continue to benefit from the interest rate reduction. 

– By Marlene Seeklander