Sign up for the 1% student loan rate cut by Dec. 31, 2026

Sign up for auto pay with your federal loan servicer by December 31, 2026, and your Direct Loan interest rate drops by 1 percentage point through June 30, 2028. The Department of Education extended the sign-up window on September 29, 2026, after nearly 2 million borrowers had enrolled. Source · ED press release, Sept. 29, 2026

If you were already on auto pay, you don’t need to do anything: your rate was adjusted automatically. If you weren’t, this is the cheapest money you will save on your loans this year. It takes one login and your bank details.

Below: which loans qualify, what the cut is worth on your balance, and the three cases where it doesn’t apply yet.

The cut is 1 point for Direct Loans paid out since July 2012

Auto pay has always earned a small discount: 0.25 point before July 1, 2026. From July 1, 2026 it is 1 full point, as a temporary benefit. Source · StudentAid.gov, IDR court actions

The Department lists who gets it:

• Direct Loans first paid out on or after July 1, 2012. That covers student and parent borrowers, including parent PLUS.
• Borrowers leaving SAVE, once they enroll in a different repayment plan.
• Borrowers in default, but only after their loans are back in good standing.

FFEL Program, Perkins and Health Education Assistance Loan (HEAL) loans don’t get the extra reduction. Source · StudentAid.gov, IDR court actions

To keep the rate, you have to stay enrolled in auto pay and keep meeting the eligibility rules until June 30, 2028. Drop auto pay and the cut stops.

What 1 point saves, by balance

The saving is the interest you no longer pay. Example: you sign up in November 2026, so the cut runs 20 months through June 30, 2028. A rough estimate is your balance times 1% times 20 out of 12.

The January column is $0 because the sign-up window closes December 31, 2026: miss it and you miss the whole saving. These are planning figures on today’s balance. The real saving is a little lower because your balance falls as you pay.

On a $30,000 balance at 6.52%, this year’s undergraduate Direct Loan rate, the rate falls to 5.52%. Over 20 months that is about $500 less interest.

Three cases where you can’t get it yet

Older FFEL or Perkins loans. These don’t qualify. Consolidating them into a Direct Consolidation Loan creates a Direct Loan, but a consolidation loan first paid out on or after July 1, 2026 limits all your Direct Loans to the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. Source · StudentAid.gov, OBBBA definitions Run both plans before you consolidate for a rate cut.

Still in the SAVE forbearance. Borrowers leaving SAVE qualify once they enroll in a different plan. If your 90-day notice is still open, pick the plan first, then add auto pay. Our guide to leaving SAVE compares the plans in dollars.

Find out if the cut applies to you

Sign up in four steps

1. Find every servicer you have

   Log in to StudentAid.gov and open your loan details. Some borrowers have loans at two servicers. Each one needs its own auto pay sign-up.

2. Log in to the servicer and choose auto pay

   The Department’s instructions: select “auto pay” from the servicer’s menu, enter your bank account, and confirm the payment amount. Calling the servicer works too.

3. Check the first two withdrawals

   Make sure the right amount leaves your account on the right date. The National Consumer Law Center suggests checking your accounts regularly once auto pay starts. Source · NCLC, Sept. 28, 2026

4. Keep the money in the account

   A failed withdrawal is a missed payment. On RAP, the interest waiver and the principal match apply only to on-time payments.

Frequently asked questions

Does the rate cut lower my monthly payment?

On a fixed plan, a lower rate means less interest each month, so more of each payment goes to principal. On an income-driven plan like RAP or IBR, your payment is set by income, so the cut mostly reduces the interest that builds up.

I was already on auto pay. Do I need to re-enroll?

No. The Department says borrowers who were already enrolled had their rate adjusted to the full 1-point cut automatically.

What happens after the cut ends in 2028?

The Department calls the cut a temporary benefit through June 30, 2028. It has not published what the auto pay discount will be after that date.

Does auto pay affect PSLF?

Auto pay doesn’t change whether a payment qualifies. It helps you make every payment on time, which PSLF and RAP both require.

Your next step: price your plan with the lower rate

The rate cut is the easy part. The bigger number is your monthly payment on the plan you choose. The loan repayment calculator shows RAP, Tiered Standard and IBR for your balance and income, with the auto pay saving included.