Borrowers with Direct Loans originated after July 1, 2012 now have until December 31 to enroll in auto pay and keep a 1 percentage point cut to their student loan interest rate through June 30, 2028. The Education Department moved the date from September 30 on September 29, giving borrowers three more months.
The cut is temporary, and the department says nearly 2 million borrowers have enrolled in auto pay, according to Under Secretary of Education Nicholas Kent. The September 29 extension was reported the day it was announced.
Which loans and borrowers are covered?
The reduction covers Federal Direct Loans originated after July 1, 2012. The department’s June 18 announcement says that includes student and parent borrowers, and borrowers who are already enrolled in auto pay keep the benefit.
Two other groups are named. Former SAVE Plan borrowers who have moved to another repayment plan can enroll, and so can borrowers in default once they bring their loans back into good standing. Older Direct Loans and other federal loan types fall outside the offer, so the loan type and origination date decide who is covered.
A borrower holding Direct Loans from 2009 and 2014 is covered on the 2014 loans only, since the cutoff is the date each loan began. The servicer’s account page and StudentAid.gov show the loan type and the start date of each one.
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How big is the cut, and how long does it last?
Before July 1, 2026, a borrower who enrolled in auto pay saw the servicer lower the interest rate by 0.25 percentage point. The June 18 announcement lifted the reduction to a total of 1 percent for eligible borrowers, which is the standard 0.25 plus a temporary extra 0.75.
On a $30,000 balance, one percentage point works out to roughly $300 a year in interest at the start, before the balance shrinks. The benefit lasts through June 30, 2028, for borrowers who enroll by the deadline or are already enrolled. The department describes it as a temporary benefit.
The original enrollment cutoff was September 30. The extension means a borrower who missed that date, or who only heard about the cut this month, still has until the last day of 2026 to enroll and receive the same reduction through mid-2028.
Under the June release, the end date of June 30, 2028 applied to borrowers who enrolled by September 30, 2026, or were already enrolled. The extension moves only the enrollment cutoff to December 31. The end date for the reduced rate stays at June 30, 2028, so the benefit ends on the same day no matter when a borrower signs up.
How does a borrower sign up before December 31?
Borrowers who are not enrolled log in to their student loan servicer account and select auto pay from the navigation menu. They enter bank account information and confirm the payment amounts. The department’s release names StudentAid.gov as the place to start for borrowers who need to sort out a defaulted loan first.
Auto pay takes the payment from the bank account on a set schedule, so the amount and date should fit the household’s cash flow. Borrowers still deciding on a repayment plan should settle that first, since auto pay attaches to whichever plan the servicer has on file.
Kent said in the June announcement that “borrowers should not wait to take advantage of this temporary interest rate reduction.” With the new date, waiting is still possible, but the window now closes in under 11 weeks.
What changes for borrowers in default?
Borrowers in default must first log in to StudentAid.gov, consolidate their eligible loans and apply for a new repayment plan before they can enroll in auto pay. Only then does the rate cut apply to the loan.
The Treasury Department said on September 30 that it and the Education Department launched a new online support center for defaulted borrowers. Treasury reports more than 5 million borrowers have been in default for over six years, and an additional 5 million entered default in less than a year.
The center lets borrowers see the consequences of default, compare ways out, apply online for rehabilitation or consolidation, make a payment and review repayment plans and loan discharge options. Treasury says consolidating borrowers can reach the temporary 1 percent reduction by enrolling in automatic payments.
Treasury says rehabilitation applications are up 69 percent and consolidations are up 95 percent, against a federal student loan portfolio it puts at $1.7 trillion. Both figures point to a growing number of defaulted borrowers moving toward repayment.
For someone who has been in default for years, December 31 is therefore more than an auto pay deadline. It is the date by which the consolidation and the new repayment plan have to be in place, and the two steps come before the auto pay enrollment itself.
Is a defaulted student loan standing in the way of the December 31 date?
For borrowers who are behind, the auto pay date is one of several dates in play. Collectors may be calling, a consolidation application may be pending, and the December 31 enrollment date sits on top of both.
That is a debt-tracking job more than an auto pay job. The Bank Account & Debt Protection Kit includes the debt-validation steps for answering a collector, plus a debt inventory, call log and deadline tracker that keeps every loan, call and date in one place. Its “When a Collector Calls” part covers what collectors can and cannot take.
Get the debt tracker and call log for student loans in collections →
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
