Federal student-loan borrowers can get a temporary 1% autopay rate cut starting July 1
Eligible federal student-loan borrowers enrolled in automatic payments will receive a temporary 1% interest-rate reduction beginning July 1, 2026, under new repayment provisions being implemented by Federal Student Aid.
Borrowers who want the reduction must enroll in autopay by 11:59 p.m. Eastern time on Sept. 30, 2026. Borrowers already enrolled in automatic payments can qualify if they meet the program’s eligibility requirements.
The reduction is currently scheduled to remain available through June 30, 2028. It is not permanent loan forgiveness, and it does not mean every federal student-loan borrower automatically qualifies. Eligibility depends on the borrower’s loan and autopay status.
How the temporary benefit works
The change reduces the interest rate applied to an eligible federal student loan by 1 percentage point while the borrower receives the benefit. Because the provision is tied to automatic payments, borrowers who are considering enrollment will need to complete the process with their loan servicer before the September deadline.
Federal Student Aid is administering the policy through participating loan servicers. The benefit applies nationwide to eligible federal student-loan borrowers, rather than being limited to a particular state or local program.
The new provision is part of the repayment framework created by the Working Families Tax Cuts Act. The Department of Education says that framework also includes two repayment options: the Repayment Assistance Plan and the Tiered Standard Plan. Both plans are scheduled to become available July 1, 2026.
Borrowers are also being moved away from SAVE
The autopay change arrives during a broader shift in federal student-loan repayment. The Education Department has begun directing approximately 7.5 million borrowers enrolled in the SAVE Plan to leave that plan and select another legal repayment option after court action ended SAVE.
Borrowers affected by the transition will need to choose a repayment plan among the options available to them. The Department has identified the Repayment Assistance Plan and Tiered Standard Plan as new choices under the law, with both scheduled to open July 1, 2026.
That transition makes the timing of the autopay deadline important. Borrowers may be dealing with a new repayment plan and an autopay enrollment decision at the same time. A borrower’s eligibility for the interest-rate reduction should be confirmed with the loan servicer rather than assumed from prior enrollment in SAVE or another plan.
What happens when payments resume
Federal Student Aid says borrowers leaving school or exiting deferment or forbearance will receive billing notices at least 21 days before a payment is due. Those notices are intended to provide the payment amount and due date as borrowers return to repayment.
Borrowers who do not make required payments can face delinquency and, eventually, default. The Department’s payment guidance urges borrowers to review their account information, confirm their repayment plan and keep contact information current with their servicer.
The 1% reduction can lower the interest rate for an eligible borrower, but the policy is temporary. Borrowers who enroll by Sept. 30, 2026, should expect the scheduled benefit to end June 30, 2028, unless the policy changes before then.
The immediate dates to watch are July 1, 2026, when the new repayment plans and higher autopay reduction become available, and Sept. 30, 2026, at 11:59 p.m. Eastern, when enrollment for the temporary reduction closes.
Sources
- How To Prepare for Student Loan Payments, Federal Student Aid
- U.S. Department of Education Announces Next Steps for Borrowers Enrolled in the Unlawful SAVE Plan, U.S. Department of Education
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