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NEW YORK -- Student loan borrowers now have until the end of 2026 to enroll in auto pay and have their interest rate reduced by 1%.
The original deadline was Sept. 30, but the U.S. Department of Education extended it to give borrowers more time to enroll. The rate reduction will last through June 2028.
Borrowers who currently use auto pay already receive an interest-rate discount of 0.25%, so the new reduction takes off just 0.75%.
This temporary benefit is meant to support borrowers, along with those who are returning to repayment, and ensure they can stay on top of the new Repayment Assistance Plan that requires on-time payments, according to the Education Department.
The interest reduction can benefit borrowers who have large balances and are on fixed payments, said Lesley J. Turner, associate professor of public policy at the University of Chicago.
"For a limited time, borrowers are now able to get a full percentage point reduction in their interest rate if they sign up for auto debit," Turner said. "So this is a quadrupling of the earlier benefit. It's a pretty big benefit, especially for borrowers who have large balances."