Overview
- The department announced the measure on Thursday and said the 1 percentage-point interest reduction takes effect July 1, 2026, and runs through June 30, 2028 with a Sept. 30, 2026 signup deadline for new enrollees.
- The benefit applies only to Direct Loans first disbursed on or after July 1, 2012, and borrowers in default must return to good standing before they can qualify.
- Borrowers already on autopay will receive the cut automatically and effectively get an extra 0.75 percentage points on top of the existing 0.25% discount while they remain enrolled in autopay.
- Education Department officials estimate the two-year program will cost about $6 billion and say the move is intended to raise on-time payments and reduce delinquencies as the repayment system is restructured.
- The change responds to a fall in autopay participation from roughly 83% in 2019 to about 40% in late 2025 and could lower monthly costs for borrowers who sign up through their loan servicers, though many must consolidate or switch plans first to qualify.