The U.S. government announced a 1-percentage-point interest rate reduction on federal student loans for borrowers who enroll in autopay by September 30, 2026, or who are already enrolled. The new lower rate takes effect July 1, 2026, and lasts through June 30, 2028 [1, 2, 3].
Previously, borrowers received a 0.25-percentage-point discount for autopay. The additional cut adds 0.75 points to bring the total reduction to 1% starting in July [1, 2, 3]. This discount applies to federal loans originated after July 1, 2012 [2].
Borrowers currently in default or on the defunct SAVE plan must first apply for a new repayment plan before enrolling in autopay to qualify for the interest rate cut [2, 3].
There are over 42 million federal student loan borrowers carrying more than $1.6 trillion in outstanding debt. Interest rates on federal loans generally range from about 6% to nearly 9% [1, 3]. For example, a borrower with $50,000 debt at 7.94% interest could save nearly $23 a month with the 1% discount [3].
Under Secretary of Education Nicholas Kent said, "The Trump Administration is making student loan repayment easier than ever, and borrowers should not wait to take advantage of this temporary interest rate reduction to stay on track for key student loan benefits" [1]. He added, "This interest rate reduction will help borrowers as they consider new, affordable repayment plans and work to repay their loans on time. We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio" [3].
The 1% interest rate reduction coincides with a major overhaul of student loan repayment plans taking effect July 1, 2026, known as the "one big beautiful bill" passed last year [1, 2, 3].
Borrowers must enroll in autopay by September 30, 2026 to receive the reduced rates, which expire on June 30, 2028 [1, 2, 3].
